“I will tell you, there’s a lot of units coming.” Liam Griffin, CEO Skyworks
February 2020: Corona could shave 10-15 million off the 150 million China planned for 2020. Korea added 313,000 in December, half the August figure. It’s too early to be sure, but I’ve changed the 5G surprise-free estimate from 210 million to 195-210 million.
I’ve maintained the 2020 5G high estimate, however. The Chinese plan a major stimulus after the epidemic, with 5G an important part. Corona will probably come under control in China fairly soon. If not, the impact on 5G will be very large.
Note: “Low-band 5G” is currently slower than decent 4G. It will never be much faster than 4G. It is not included here. It will be large in the U.S.
email@example.com with errors, updates, and ideas to share.
This publication is distributed under a Creative Commons Attribution-NonCommercial License CC BY-NC Cory Doctorow has proven it’s possible to give away your work and make it up on related sales. I welcome consulting, speeches, & presentations on 5G. My charges are reasonable. Dave
Surprise-free 195-210 million 5G 2020 scenario
5G in 2020 is an Asian story, which will generate over 70% of connections. In 2019, Korea added 4.67 million connections, almost 10% of the country.. 93% of the population is covered. The goal for 2020 is 15 million.
China plans 150 million 5G connections in 2020, directed by MIIT Minister Miao Wei with support from the highest levels. The three telcos know they must deliver. Until Corona, reaching the goal was highly likely. Corona will reduce the Q1 figures by 10-15 million.
Xi Jinping and the Politburo have declared 5G a crucial part of the $5 trillion stimulus. The 150 million connections are likely to be met. 550,000 new cells will be added to the existing 132,000. About 50% of the country will be covered.
No other country has provided estimates for 2020 5G. Many of the companies have revealed deployment plans, from which I infer a figure of 45 million 5G connections outside of China and Korea.. This is a soft number, one reason I offer a lower scenario below.
Apple will introduce the 5G iPhone in the fall. Verizon anticipates substantial demand and is rushing to have a network ready. More than half the premium phones in the West are iPhones. If many of them upgrade to 5G late in the year, the 45 million figure is reasonable. Apple expects a blockbuster year and has raised chip orders 50%. However, it is already seeing delays as the supply chain struggles. There are rumors that difficulties with the antenna may push deliveries back to the very end of the year.
Japan is the only country with a large population with the potential for rapid takeup of 5G. With the fourth carrier, Rakuten, now deploying, the other telcos have an incentive to grow quickly. They have said nothing.
India’s Reliance Jio, with 370,000,000 4G customers, is equipped to start selling 5G “90 days after the government approves.” Approval is now held up by politics and unlikely to be a large factor in 2020. When Jio upgrades, it could grow very rapidly.
A companion work, 5G By Countries, 2020 has the best information I can find. We will learn more in the coming months.
- Much lower phone prices. The Xiaomi $285 Redmi 5G went on sale in January. This is killer. Many decent 5G phones cost $285-380 as nine phone makers are fighting for market share. Sprint now wants to bring $300-500 phones to the US. Xiaomi founder, Le Jun, explains, “Today’s China is an era of overcapacity.” Wang Xi of IDC believes sales will explode as prices fall below 2,000 yuan ($285.)
- Apple is raising chip orders as much as 50%, per Digitimes. The $399 iPhone SE, close to market, should be a very hot product. When iPhone 5G ships in the fall, it will probably inspire a surge in demand.
- 5G’s low cost per bit allows improved offerings. Better services, not far-future new apps, are the way for telcos to monetize 5G. Verizon sees 90% savings, DT 70%*. Once the network is built, the marginal cost is very low because of enormous capacity. That’s a big incentive to move customers to 5G and sell more to fill the network.
- Surprisingly low network costs allow better coverage sooner. Korea has 93% coverage with 190K radios. China has about 10% coverage with 132K radios. Europe is far behind. Deutsche Telekom and Telecom Italia expect only 20% coverage entering 2022. The extra cost to reach 60-80% in 2021 is 1-2% of sales per year. Few European carriers are willing to make the investment, which I think is a mistake. Telefonica Deutschland is raising capex almost 20%. If well-executed, it will pull ahead in the German market.
If 5G costs were high, carriers offering 5G would have to increase capital spending. The opposite is happening, although all major carriers are building 5G. The “very high cost of 5G” is a myth. Some, including Verizon, NTT, and Orange, actually are able to reduce capex.
Mid-band 5G, rather than millimeter wave, has reasonable costs and good reach. mmWave would require many new small cells and backhaul. No one except Verizon is building much mmWave in 2020 or 2021. Using existing cells is much cheaper than building new ones.
Radios have plummeted in price. Very large carriers are paying < $15,000 if analysts have it right. Indoor small cells are coming to market for $1,000 to $3,000. China plans to deploy millions.
Other savings include the use of wireless backhaul rather than fiber where fiber would be too expensive. Even Verizon is planning 20% wireless. mmWave will need fiber, but mid-band works fine with the 5 gigabit and faster microwave that’s fallen in cost. Inband backhaul, using the same 5G frequencies, looks promising and will save cost.
- Huge sales in China of 150M+ phones and 300,000 or more radios, give Huawei an important boost. That’s strategically important as Huawei is under attack by the U.S. Chinese demand has also pushed ZTE to a record high market value.
- The 5G hype is overwhelming in the West so far. Result: Many people are enthusiastic and natural buyers when phone prices come down. Verizon’s Hans Vestberg reports people buying 5G phones even where it doesn’t offer 5G. I expect that most mid-range & premium customers soon will buy 5G as coverage builds past about ?10% and Chinese prices spread worldwide. 4G phones will be obsolete by a year or two after that. A worry is that customers will discover 5G does very little that’s important today and the demand will fall, a key question.
- Possibly emerging competition. T-Mobile has 160 MHz of golden spectrum at 2500. It committed to cover 80% of the U.S. with 100 Mbps in four years to take over Sprint. It also committed to high capex levels. Its logical strategic move is to emulate Korea and get to 80% in 12-18 months. If so, the other carriers will have to speed up. New entrants Rakutan in Japan, 1&1 Drillisch in Germany, and China Broadcast could have a similar impact, although that’s more probable in 2021.
- Vendor financing, often at attractive terms, allows cash-constrained telcos to move forward. Finland is financing Nokia sales (AT&T,) Korea is financing Samsung ($billions for Reliance Jio,) and China both Huawei and ZTE. Almost any interest telco can call one of the vendors, say “build it,” and have the bill paid by vendor governments. Carlos Slim’s American Movil just announced 5G in carriers across Latin America. My guess is they will go slowly, but the Chinese government would almost certainly finance Movil in Mexico and Brazil if asked.
- National pride, economic, and trade goals inspire Korea and China. The two plan 165 million in 2020. That could spread to Japan and South Asia. Europe and the US mostly talk as we enter 2020. To meet government goals, Chinese telcos price 5G at $12-18 after discounts (30 gigabytes.) The Chinese see a major economic boost from 5G. That’s widely believed worldwide even if it is nonsense. The “studies” claiming a large economic boost are bogus; 4G can serve nearly all the applications discussed, as Telefonica CTO Enrique Blanco tells anyone who will listen.
Table 1: 5G by Country, Feb 2020
Note: About 30 more companies have made announcements that seem mostly pr.
Low-band 5G is an oxymoron. What AT&T & T-Mobile are deploying in the U.S. is slower than 4G and not included in any of my estimates.
|Country||Company||Subscribers (M)||Radios||%population||Date deployed|
|Austria||Hutchison Drei Austria||100||2019|
|China||China Mobile||6.7||50,000||10% 2019, 50% 2020||6/15/2019|
|China||China Telecom||8||40,000||10% 2019, 50% 2020||6/15/2019|
|China||China Unicom||?5||40,000||10% 2019, 50% 2020||6/15/2019|
|Japan Country||>Q1 2020|
|Korea country||5M 2019, 15M 2020||Over 100K||93% 2019|
|Saudi Arabia||STC||several hundred|
Analysis that straightens the argument
- The 5G transition is a “once in a decade” opportunity to win market share. The quote is from LG Uplus, explaining to investors why a jump in marketing costs was correct. It added 4 points of market share despite retaliatory actions by the others. Xiaomi said almost exactly the same thing to justify the $285 phone price. Both companies have been especially aggressive.
- That’s the natural but unlikely move by Telefonica/O2 and Vodafone, among others. Early enthusiasm is mostly due to hype, but customers want 5G The much higher than expected response in Korea and China is convincing. Polls and market research consistently show at least half of buyers want 5G phones.
- 5G phone prices are coming down rapidly. At Xiaomi, the difference between 4G and 5G is $55. In 2020, the difference in manufacturing cost will be $15-35, driving price convergence. It’s becoming clear that 4G phones will be out-of-date and uncool in a year or two in many countries.
- 5G Coverage will expand at differing rates in different countries. But in two years, coverage will be wide enough 5G phones will often/usually find a signal. 4G phones will be perfectly functional for years, but who wants to take an obsolete phone out in front of friends?
- Qualcomm, Qorvo, and Skyworks have raised 5G 2020 estimates to over 200M. They supply essentially every major phone maker except Huawei and know what their customers intend to build.
The forecast would be more certain knowing:
- When/whether the “collaborative cartels” break Europe is held back primarily by cartel-like behavior. If competition were strong, at least one carrier in each market would be aggressively building. The others would follow. A smart regulator will make sure one carrier rapidly builds 5G. 1&1 Drillisch in Germany, Free in Italy, and 3UK need customers. Could Merkel persuade the European Investment Bank to help Drillish build 5G? Update Feb 16 Telefonica Deutschland raised capex ~20%, an interesting decision.
- When will the mid-band spectrum be released in all countries? Large chunks of spectrum between 2.5 GHz and 4.2 GHz are extremely efficient due to Massive MIMO. The ideal is 100 MHz per company. Lower frequencies need larger antennas for Massive MIMO, making it impractical below about 1800 MHz
- “Low-band 5G” is a joke and pr stunt, but mid-band typically delivers 100-300 megabits. mmWave delivers 3X that capacity but will be very rare for at least several years.
- Will carriers price aggressively because 5G is much less expensive per bit? Almost all are now charging the previous 4G price (or more) for 5G. making it very profitable when scale is reached. Verizon and BT want a premium but are meeting customer resistance. In a strongly competitive market, prices will fall towards the lower costs over time. Most countries have inadequate competition for the market to work its miracles.
Threats to the surprise-free estimate
Estimates from analysts like Dell’oro, Point-Topic, and Matt Davis generally are on target because they usually begin with several years of data and add key factors. Is the market approaching saturation? Will new technology or lower prices have a large impact? Have any of the companies announced plans?
In 5G, I’m working with six months of data from Korea and two months from China. The numbers are very uncertain.
People may realize the 5G emperor has no clothes.
In reality, 5G has little practical advantage for most consumers. So far, most believe the hype. 4G 5 / 17 5G 2020 210 million projection is 75-125 Mbps in more and more places. Other than major downloads, how often do you need more than 50 Mbps on your phone? That’s twelve HD TV channels or three 4K TV channels.
All 5G chips come from two two manufacturing sources
TSMC in Taiwan produces most chips. Samsung produces chips for Samsung and Oppo phones. Qualcomm will shift some production of the X60 to Samsung. Both are expanding capacity for the state-of-the-art 7nm and 5 nm foundries. They are buying $200M+ EUV machines as fast as ASML, the only manufacturer, can build them. Demand from Apple, Huawei, AMD, Qualcomm, and Nvidia is far more than expected. TSMC is confident it can add capacity fast enough. It won’t be easy. An earthquake in Taiwan could be devastating.
The US-China trade war
Huawei has won, with sales continuing to climb despite a ferocious attack by a superpower. It now makes phones and radios with no US component. Huawei’s $17B annual research budget means thousands of engineers are inventing substitutes. HiSilicon is state-of-the-art in 5G chips, AI, & network processors. It had almost no RF chips for the front end of phones a year ago. It now produces very sophisticated ones. The Google cutoff is reducing phone sales in Europe, the only major US weapon that is having an impact.
I wrote in an earlier draft “I don’t think the US could force TSMC to cut off all chips for Chinese phone makers, but it’s not impossible.” Since then it has made that threat and Taiwan was apparently ready to accede to American demands. It’s now unclear.
Something I haven’t thought of
Black Swans happen. Coruna has cut Q1 by 10-15 million. Many more if it isn’t soon contained. However, the impact could be reversed by China stimulus
In 20 years of reporting, I’ve never heard as many errors and lies. I’ve been calling b_______ on many for almost two years, but too many can’t hear their mistakes. Confirmation bias is everywhere. Everyone wants to believe 5G is wonderful, that it will transform economies, and will produce big profits for carriers and vendors. All are extremely unlikely.
Speeds are mostly 100-300 Mbps down, not much different than new 4G. (Except mmWave.)
Latencies are ~30 ms. , not much better than most 4G. Edge networks can bring either 4G or 5G latencies to 10-20 ms, but will be very limited outside Asia for years.
Nearly all new apps needing 5G will be small for years. Nearly everything will work fine on 4G. Autonomous cars are far away and won’t need 5G. Remote surgery
Low band 5G is slower than good 4G, at least for years. It doesn’t belong in 5G numbers. Speeds are typically 50-125 Mbps.
Claim: 5G networks are very expensive to build
Actual: 5G network deployments in the real world are not expensive compared to telco capex
Verizon and NTT DOCOMO are building extensive 5G while cutting capex. Orange and Telefonica expect the same. Nearly all 5G is mid-band, at about 4G cost to deploy. It has decent reach and requires few new towers. Deutsche Telekom and Sprint confirm that.
The high estimates are based on untrue assumptions except for mmWave, less than 5% of 5G deployments.
Claim: A telco is building rapidly when it targets less than 40%
Actual: 50% coverage is practical in two years across the developed world. Korea actually reached 93% in about 18 months. China almost certainly will reach 50% in about 18 months. The plans of 20% in two years from DT, Telecom Italia, and other Europeans are far less than the carriers could build.
Mid-band 5G – 95% of radios – is a gigabit
Actual: 5G networks generally deliver 100-300 Mbps. Gigabits are for the lab or mmWave. Above 400-500 Mbps will be the exception except for mmWave.
Today’s 5G networks have very low latency, such as 1 ms
Actual: Most 5G networks have ~30 ms latency, as announced by Verizon. 4G typically is 35-50 ms, but new equipment can be less than 30 ms. The major improvement, short TTI, is in both 4G and 5G today.
Edge networks can bring that down to 10-20 ms but are few. URLLC may reduce that by an additional 3-5 ms, but URLLC deployment is not imminent. Less than 10 ms will mostly be a lab phenomenon for years.
Autonomous cars require 5G
Actual: Thousands of autonomous cars are on the road today without a 4G connection. There will be millions in a few years. They have to be able to work when there is no signal.
As far as I know, none of the autonomous cars close to production will require 5G. The automakers don’t want to be dependent on the telcos – and don’t want to share the income.
All cars will be connected for entertainment and much more. But connected cars do not need extreme speeds or very low latency. They work fine with 4G.
Claim: 5G will grow remote surgery
Actual: 5G is almost irrelevant for remote surgery. Fiber is faster. Any facility that can afford a million-dollar remote surgery machine is likely to be connected by fiber. So are most surgeon’s hospitals and offices. Unless surgeons operate from the beach, 5G doesn’t matter.
Claim: Ultra Reliable Low Latency Communications (URLLC) delivers as named
Actual: Almost all security experts deprecate claims 5G URLLC will be ultrareliable. The 3GPP standards make that claim because some known problems have been fixed. New ones are already developing. The general expectation is that 5G networks will be more vulnerable than 4G because they have so many points of attack. Notoriously insecure IoT will be a major part of the system.
Claim: 5G will have a major effect on jobs or the economy
Actual: Use common sense, please. Very few applications need better than the 50 Mbps down and 40 ms latency common in 4G. Most of the capacity of 5G will be dedicated to video and games. Does watching more TV really improve the economy? All the projections start with unsound assumptions. 5G is not needed for autonomous cars and trucks. Nearly all the high-impact use cases work well with 4G. I’ve looked at the primary sources, such as Qualcomm’s IHS study. It claims “In 2035, 5G will enable $13.2 trillion of global economic output.” A strong majority of the applications cited work fine in 4G.
Even if there were natural uses for 5G, it’s absurd to estimate 15 years ahead on something that has no track record. Unsupportable assumptions from Qualcomm imply that 5G IoT uses less power than 4G IoT and that 5G has better reach than 4G. Neither is true.
Claim: It’s impractical to deploy faster than we are, according to many telcos
Actual: There are no technical or economic reasons 5G couldn’t cover 80% of the developed world in 2 or 3 years. Korea reached over 93% in 18 months. China is on track to reach 80% in 30 months. The engineers in Germany are just as capable as the Koreans. Because Germany and the UK are less dense than Korea. 93% in 18 months may not be practical but 80% surely is. BT is actively training technicians for fiber installs and could do so if tower workers were in short supply. In the US, service companies are clamoring for more work. Verizon & AT&T have cut capex. Simply holding capex steady would allow much faster 5G builds. Deutsche Telekom profits are up significantly but the money is not being spent on the network.
Company problems, limited competition, and timid regulators are leaving Europe far behind. Europe is dominated by de facto cartels. “If we build more 5G, so will our competitors. The result: we’re both spending more money but stay in the same position.” That attitude is doing more to hold back 5G in Europe than costs, regulators, or spectrum.
It’s likely a mistaken analysis. Networks take a long time to plan and build. You can’t be a “fast follower.” The first mover can expect an important gain in market share and reputation, as demonstrated in Korea. Vodafone was explicit. “We will match our competitors in Germany.” (Quote from memory.)
No one had to meet in obscure airport motels. Collaboration is established by open statements, typically on financial calls. “Rational” behavior, companies like this agree, is for all to limit investment. Nearly everyone already has a smartphone, so better networks will not attract more customers. The same income with lower capex = higher profits.
The tech people at major carriers agree with me. Those at Verizon and AT&T argued strenuously against the investment cutbacks, but only in private. I’m hearing similar from top technical people in Europe.
Claim: Releasing more mmWave spectrum will lead to a faster buildout
Actual: Except for Verizon in limited areas, carriers who have high band spectrum do not expect to use it extensively for years except in very limited locations. Few carriers will build out that spectrum until they have reached near-capacity in mid-band, which requires fewer sites and is much cheaper.
Claim: Reducing the barriers and cost for adding small cells will lead to much faster rollout of 5G.
Actual: America did just that but the actual small cell build is slightly less than predicted before the new FCC rules. Almost all small cells are going to areas where the capacity is needed, typically business districts. The new cells are needed for 4G as well.
Making it easier to deploy small cells saves carriers money, but they would have found a way to build most of the cells because they are necessary.
Table 2 5G Phones Feb 2020
|Company||Model||Release date||Size (Inch)||#Rear Cam||Grams||Battery||Price China|
|Update Feb 20|
|Huawei||Mate 20 X 5G||August 1||7.2||3||232||5000||900|
|Huawei||Mate X Fold||October 2019||2500|
|Huawei||Mate 30 Pro 5G||Dec 2019||6.5||4||198||4500||810|
|Huawei||Mate 30 5G||Dec 2019||6.6||3||196||4200||710|
|Huawei||Honor V30||Feb 2020||6.6||3||4100||470|
|Huawei||Honor V30 Pro||Feb 2020||6.6||3||4200||550|
|Huawei||Nova 6 5G||Decenber 2019||6.6||3||212||4200||550|
|Huawei||P40 Pro||March 2020||5|
|Lenovo/Motorola||Z6 Pro 5G||March 2020||6.4||4||185||4000||455|
|LG||V50 ThinQ||July 2019||6.4||3||183||4000||700|
|OnePlus||7 Pro 5G||June 2019||6.7||3||216||4000||840|
|Oppo||Reno 3 5G||12/1||6.4||3||181||4025||458|
|Samsung||Galaxy 10 5G||May 2019||6.7||4||198||4500||800|
|Samsung||Galaxy S20||March 2020||6.7||4||188||4500|
|Samsung||Galaxy S20 Ultra||March 2020||6.9||4||222||5000|
|Samsung||Note 10 5G||August 2019||6.3||3||168||3500|
|Samsung||Note 10+ 5G||August 2019||6.3||3||198||3500|
|Sony||Xperia 1 II||June 2020||6.5||3||4000||?1300|
|Vivo||iQOO 5G||August 2019||6.4||3||196||4500||536|
|Vivo||X30 Pro||January 2019||6.4||4||4350||570|
|Xiaomi||Mi Mix 3 5G||July 2019||6.4||2||218||3800||700|
|Xiaomi||Mi 9 Pro||November 2019||6.4||3||4000||520|
|Xiaomi||Redmi K30 5G||January 2019||6.7||4||4500||285|
|ZTE||Axon 10 Pro 5G||August 2019||6.5||3||175||4000||710|
The Low Scenario: Perhaps Only 165 Million
December 3: Updated from 160M to 170M based on the Chinese decision to sell 150M subs.
Feb 15: Reduced to 165 million because of Corona and disappointing numbers from Korea and China
GSMA, one of the very best analyst groups, still has a 2020 estimate much lower than mine. So do several others. Its Global Mobile Trends 2020 is very thoughtful and well worth a download. When people I respect have a different opinion, I go back and look closely. I’ve outlined here what’s behind my numbers.
China’s plan to sell 150 million 5G phones in 2020 has strong government backing. The country is unlikely to fall very short. Korea expects 10 million more and 93% of the country already is covered by 5G. The U.S., Australia, Canada, and Japan expect growth.
MIIT, which controls the three telcos, declared in summer 2019 that China would add 150 million 5G users in 2020. The country is highly unlikely to fall well beneath the goal. Authoritarian governments are not my choice, but in China it has proven effective.
The Chinese carriers nearly always find ways to deliver what the government demands. MIIT can fire managers who are unsatisfactory and often does. The budget and conditions are in place to meet that figure. The typical technical publication produces several articles each week about how great 5G is, knowing the state wants them to create demand. The general press, like People’s Daily, often adds to the hoopla.
More pragmatically, the price of 5G phones is so close to the price of 4G phones, it’s the sensible choice of many consumers. Xiaomi charges $285 for a decent 5G phone. Chinese buy about 400 million smartphones a year. Given the price drop, it would not be surprising if 40% of the phones sold in 2020 were 5G.
What surprises could drive 2020 sales lower?
Corona is reducing 5G sales in Q1 by 10-15 million. China expects to bring it under control fairly rapidly and restore production with a huge stimulus. The consensus of experts is that fairly rapid control is likely but none are certain. If Corona lingers, not just China will be affected. The world is likely to go into recession and fewer people buy new phones.
There are other plausible factors that could hold back 5G:
If people realize that 5G has few if any practical advantages, they could hold off buying.
If TSMC can’t raise production sufficiently, that would be a major holdback. All 5G chips except Samsung and Oppo are produced at TSMC, which is already asking six month’s lead time on new orders. TSMC & Samsung are adding capacity as rapidly as ASML can deliver $200 million EUV machines. Both are optimistic they can meet the very high demand from Apple, AMD, Nvidia, and many others. An earthquake in Taiwan, a defect in chemicals, or anything else that holds back production could have a large impact.
Almost all US and European 5G builds are so limited they are essentially pr for now. While many of the top European tech people agree with me accelerated builds are a smart move, their CEOs still are holding back. My guess is the Europeans will respond when they realize the demand, but none are moving yet. Currently, they are counting on a gentleman’s agreement not to build.
Apple’s 5G iPhone is expected to create a surge in demand in the fall. If it’s late, many purchases will be delayed into 2021. It’s rumored to be held up as Apple tries to shrink the antennas and keep the phone thin.
and surely other factors I haven’t anticipated.
The high scenario: 265 million
The industry is ready to produce enough radios, switches, routers, optics, and for far more than 210 million users in 2020. The telcos remain extremely profitable even if growth is slow. A modest increase in capex – 2 or 3% of sales – could bring most developed countries to 80% coverage quickly.
Consumers and buyers tend to move slowly at the beginning unless acted on by an external force. That’s happened in Korea and China. The government decided to make it so. They are currently over 90% of 5G subscription and will remain over 70% in 2020. In Korea, the telcos profits are now higher.
If governments or dedicated carriers chose to move hard, things will be very different. But most regulators, including all in Europe, are inclined to defer to the companies. Most carriers would rather give more to shareholders rather than invest.
The likely result will be slow growth in most countries.
The price of phones comes down worldwide and drives sales
One reason demand is exploding in China but slow-moving in the West is that 5G phones in China cost about half the price. Decent 5G phones cost US$285. China Mobile expects the price to come down below #200 by the end of the year.
Those low prices for most 5G phones make sense because the parts for a 5G phone in 2020 will only cost $15-35 more than 4G in 2019. Nine phone makers are fighting for a market where only 5 or 5 can make a profit. Apple, Google, and Lenovo/Motorola will join them. In China, prices down far more rapidly than anyone expected.
It only costs $1 to airfreight a phone. Sprint is already promising phones from $300-$500, although T-Mobile will probably be more cautious.
Any large telco can make three phone calls and get bids 60-70% below most European and US current phone prices. If Free in France or Italy makes those calls, the other telcos will have little choice but to follow. Xavi – please.
I’ve already had a query about whether you could make money by importing phones to Europe. It’s probably a good business, although small incompatibilities could be a problem.
5G is a once in a decade opportunity for companies to win.
Europe and US might go beyond pr
The massive hype around 5G in the West is almost totally hot air, incompetent regulators, and companies unwilling to give customers what other countries offer.
Korea covered half the country by the middle of 2019 and 93% at the end of the year. Germany and England are less dense, so 80-85% in two years is probably comparable. Any honorable regulator will demand that telcos across the developed world at least cover 80% in two years.
I do not know any Western companies planning more than 10% at the end of 2019. Germany and Italy are talking only 20% in 2021. If 5G is important, that’s ridiculous.
Alternately, an aggressive challenger could force the incumbents to respond. I’ve calculated that a 10-15% capex increase at Vodafone or Telefonica would pull them well in front and win customers. Because it would take a while for others to catch up, the added customers almost certainly will more than make up the cost.
It’s the right business move for companies like those, although the CFOs don’t see it yet.
Apple prices 5G aggressively and heavily promotes it
Tim Cook will sell the iPhone SE 2 for $399 according to press reports. It has also been cutting prices in China and India. Steve Jobs never did that, but it’s a sensible move for Apple to also offer phones below super-premium prices. Apple is making tens of billions on services. The 30% cut of game revenues is enormous. The more iPhones, the more service income.
Apple is a year behind on 5G. It could sell a 5G phone based on the SE 2 at $499 and actually have a higher profit margin over the 4G version.
I’m betting Tim won’t do it in 2020, but I believe it’s certainly possible.
T-Mobile U.S. builds fast on the 2.5 GHz golden spectrum
Once the Germans say “Go!,” Neville Ray can and should move at extraordinary speed. That was Sprint’s plan; it still has more 5G coverage than anyone else in the U.S. despite shutting down upgrades months ago pending the merger.
T-Mobile promised to invest as much as both companies combined for three years. It also promised the FCC to offer 5G to over 90% in three years and 100 megabits to over 80% in three years. The 160 MHz of mid-band spectrum is among the best in the world, with the lowest 5G cost to deploy.
AT&T and Verizon would have to respond by speeding up deployment. Currently, they are reducing capex, not good for the quality of networks in the U.S.
Neville Ray and John Saw have plans ready to go. They may use most of 2019 to merge the companies, however.
When T-Mobile does go, just watch.
Japan comes in strong
The Japanese will turn on 5G in the spring, probably March. They’ve given no information on what areas will be covered. Most infer Japan 2020 will be limited both in coverage and subscriptions. My surprise-free estimate has only a modest contribution from Japan. Will they go slow? Rakuten, the new 4th telco, has promised to change the market.
Seizo Onoe, the CTO at NTT DOCOMO, and Tariq Amin, CTO at new fourth carrier Rakuten, are among the most respected in the business. Given the capex, they could match what the Koreans have done, 50-80% coverage the first year.
The public wants to buy 5G; priced right, 10% of Japanese, ~12 million, might sign on quickly. The Korean telcos had to subsidize the early, expensive phones to get a high take rate. The Japanese can offer reasonably priced phones from the beginning because phone prices have fallen so much.
At Rakuten, Tariq Amin is building one of the most advanced networks in the world, completely software-defined and cloud native. The network has gone live with 4G and is designed to launch 5G soon. Rakuten intends to follow the Jio model: Efficiency for very low costs that allow low prices to win customers. The 370 million 4G customers Jio has won in 4 years are more than the population of the US. They will change the Internet.
The surprise-free assumption is that 2020 5G in Japan will be limited, but it’s easy to envisage a scenario of much higher growth.
China “accelerates” even more
Minister Miao Wei believes 5G will accelerate the economy and in the spring told the carriers to “accelerate.” The results are remarkable; over 100 million people can get 5G today. The plan for 2020 is 150 million subscribers and over 600 million servable. That is realistic given that the Chinese buy ~400 million phones a year. If the stimulus after Corona focuses on 5G, it could go even higher.
“Acceleration” is important for political reasons as well. Huawei sells close to half of the phones in China. The increased sales of radios and phones in China are replacing the sales lost in Europe because of the US boycott.
To further support Huawei and for other reasons, the government could tell the telcos to sell even more 5G than the current plan. That might require device subsidies and other promotion, but not beyond what the companies can afford.
Other surprises are possible
The technology and cost factors could make 5G in Africa and Latin America profitable. The companies now are planning very little in 2020, but national pride or competitive demands could change that.
“Unknown unknowns” and black swans are always possible, especially in something growing as fast as 5G.
Low-band is not included in my 5G figures.
“5G low-band” runs at about the speed of 4G. I think it’s a scam to pretend it’s something special. It’s just 4G with some software, “5G NR.” In low bands, the software does almost nothing.
Don’t believe the hype.
Further data from our reporting
The January price of $285 startled everyone. $300 was expected by the summer but Xiaomi decided to cut prices 6 months earlier.
Xiaomi Redmi 5G: $285. The explosion is here.
Xiaomi’s first 2020 phone is US$200 cheaper than anything else in the world, half the price of many, and less than a third of the prices in the West. Huawei and China Mobile expected the price to fall under $300 in the summer of 2020. Shipping in January, Xiaomi has moved 6 months before anyone anticipated.
Lu Weibing of Xiaomi is seizing “a historic opportunity” to win market share for the next decade. Huawei has jumped to over 40% market share in China. The low price is a weapon against the Huawei Honor brand, Lu is
“Very confident that K30 will completely crush the V30 of friends. This product must be the turning point between the two brands. We will form a crushing trend.”
The Redmi K30 5G uses the new Qualcomm Snapdragon 765G, priced lower than the 865G in all prior Qualcomm 5G phones. While chip prices are confidential, Qualcomm has reduced the price differential between the 765G and 4G chips. The 4G version of the K30 is $230, only $55 less than the 5G.