562,656 Koreans go back to 4G

Realme price US$150 for 11/11 sale

5G has so few practical uses that half a million Koreans have gone back to 4G. The saving is modest; otherwise, millions would have gone back. 4G speeds averaged over 50 Mbps in 2019. 4G is probably much faster today.

5G averages 300 Mbps across about a third of the country. So what? What can you think of that runs much better at 300 Mbps than at 50 Mbps? The latency is about the same. YouTube, Facebook, 4K video, and almost everything else is exactly the same on 50 Mbps 4G or 300 Mbps 5G.

Korea expected 15 million 5G users by the end of 2020 but will only reach 10 or 11 million. 800,000 chose 5G in August 2019 as the carriers deeply discounted the phones. The carriers somehow agreed to stop the discounting and sales plummeted.

China’s 5G looks likely to be 170-180 million by yearend. That’s more than the 150 million Chinese target and the typical Western estimates of ~100 million. People refused to believe my Dec 2019 estimate that 2020 would see 210 million worldwide and 150 million in China. It will probably finish higher.

That’s because the price difference between 4G and 5G is collapsing. If the extra cost is modest, it makes sense to go for 5G even if it does nothing useful now. Perhaps that will change in 2 or 3 years.

The difference in the bill of materials cost between 4G & 5G is US$15-35. (mmWave is more.) With eleven phonemakers fighting for market, I expected prices to plummet. They have in China, where more than 60% of the phones sold are 5G and the rate goes up every month.

For the 11/11 big sale, Realme is advertising 5G at US$150. Several other have 6.5″ 5G phones with multiple cameras and other features for US$200-250. The service costs the same. All but the poorest will be buying 5G.

Apple has now brought iPhone 12 5G premium to $0. All models have mmWave wave 5G, the most expensive kind. It costs less than $2 to airfreight a phone from China to Europe and a grey market is already emerging. When the Chinese prices come West, 5G will quickly dominate. My 2021 and later 5G estimates need to be raised.

The Korean carriers claim 90+% coverage but Open Signal found only 30%. These are public companies that rarely lie, so it’s hard to tell what’s going on.

It could be that the carriers (and government) are only testing outdoor, although they claim that’s not so. 70-80% of mobile connections are indoor. The available data do not show a huge indoor falloff in mid-band spectrum, as used in Korea. Data is limited. It could be mid-band has a bigger problem with walls and windows than anyone is willing to admit. mmWave is seriously impeded by most barriers.

A second possible explanation is that the telcos are delivering 4G even when 5G is available. Perhaps when the telcos could deliver 5G at 100-250 Mbps, they choose to switch to 4G. That would raise the 5G speeds but severely reduce the % of 5G connections. Samsung is using the Korean speeds to sell radios in other markets. They might want the telcos to goose the figures, assuming buyers elsewhere won’t catch on.

I’m not satisfied with either explanation and welcome information, on or off the record, from people who know more.

Andrew Collinson of STL Partners warned that people were likely to be disillusioned with 5G*. He expected consumers to avoid 5G, at least in Europe, when the word got out, especially if telcos charged a premium. The disillusionment is coming in the US and 5G sales have been dismal. (7-8 million so far this year.) iPhone will change that. Other low priced phones will come in the next few months.

The Korean government has told the carriers to reduce 5G prices. With low priced phones coming, Korean 5G should again take over.

* In an analysis report we wrote for clients of STL. STL does good work and I’ll be happy to introduce you to Andrew. As 5G deployed, my conclusions on use cases and the wisdom of telco diversification have diverged from STL.

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