With every new generation of cellular technology comes the 4 big questions:
- When will it happen?
- How much will the handsets cost?
- What is the “killer app”?
- How will operators monetize and justify our investments?
It’s a chicken and egg scenario…the answer remains to be seen.
However, what is clear is that while the focus is primarily on the fancy use cases and applications, the less glamorous leading indicators of a successful evolution of a generational change in technology are often overlooked. These indicators include: network infrastructure, device to cloud analytics, spectrum allocation and a well-designed RF Front End (RFFE).
The road to 5G is more of an evolution rather than a wholesale change. Current 4G and LTE Advanced infrastructure lay the foundation for forthcoming 5G implementations. In turn, 5G scenarios are expected to come into play in 2019. However, these initial deployments will not be true standalone 5G. Infrastructure and component providers will be among the first to reap the financial rewards of the 5G evolution as they enable operators to provide the framework of the endless possibilities including 8K video streaming, artificial intelligence, virtual and augmented reality, industrial and enterprise applications etc.
This generational change will differ in that advancements in cloud applications, which will remotely manage data traffic, are expected. The offerings of a product portfolio, including software solutions, intelligence and services that can enhance connectivity, speed, capacity and latency, are prime areas of growth and where increased revenue streams are expected.
Spectrum allocation and a systematic spectrum migration are integral pieces of a successful 5G experience. As the demand for data traffic will undoubtedly increase, spectrum utilization will need more bandwidth (greater than ), increased capacity and lower latency. Therefore, we will see manufacturers of components thrive: filters, MIMO antennas, and smaller lower cost components to meet the increased demand in data traffic. Optimal use of spectrum will also be achieved with an increase in carrier aggregation and network slicing. Companies in these realms will see the effects of this transition to 5G on their balance sheets well before the influx of 5G handsets in the marketplace is experienced.
Handsets are the tangible 5G assets that we hold in our hand. But the important variable to consider in a 5G handset is the RFFE. The RFFE is all about efficiency with regards to size, cost, power, design, use of spectrum, performance and scalability. The challenge to the manufacturers is to provide a powerful RFFE, whilst reducing the complexity and cost associated with accommodating for an increase in RF pathways per frequency band.
Looking at the data from IHS Markit’s Wireless Competitive Landscape Tool (WCLT), we can deduce that the greater momentum in the infrastructure LTE baseband market will lead to a higher demand for the handset LTE baseband IC market. The demand for data traffic will cause infrastructure investments to surge, as history depicts below in the transition to 4G LTE deployment in Q1 2012 and another growth spurt in Q3 2015. In turn, an increase in handset baseband revenues will be secondary, approximately one year later, as evidenced shown below. Subsequently the uptick in global LTE adoptions in Q3 2015 led to a surge in handset baseband revenue spiking in Q3 2016.
The Wireless Competitive Landscape Tool (WCLT) also shows that the LTE infrastructure baseband market is primarily comprised of NXP, Texas Instruments, Analog Devices and Qualcomm. NXP has maintained its position as the market leader. They have a strong product portfolio and proven track record with regards to wireless infrastructure components market.
Within the LTE handset baseband market, the leading players include Qualcomm, Samsung, MediaTek, Intel, Tsinghua (Spreadtrum) and a group of other baseband vendors. Qualcomm’s innovation and focus on being first to market has led to its success in the past and they have made many inroads already in the 5G space.
The 5G market adoption in 2019 roadmap is expected to follow the same behavior patterns as 4G: first an uptick in network infrastructure, followed by an increase in revenues with regards to the RFFE. In this generational transition, the RFFE will play an especially significant role given the network complexities and multiple radios, not to mention the limitations of the handset (size, power, connectivity).
Using tools like the WCLT from IHS Markit, the data identifies the larger cyclicality of the market. History shows us that the way to spot the leading indicators of a successful 5G transition are to look for the growths in revenues first in the infrastructure baseband market, followed by a spike in the handset baseband market. The transition from 4G to 5G will be embraced by industries across the board: manufacturing, industrial, computing, automotive, retail, entertainment etc. - a truly transformative technology. Network infrastructure advances, device to cloud analytics, spectrum allocation/migrations and a smart RFFE design are all leading indicators of a 5G transition which will deliver on the high data speeds, low latency and network ubiquity. These providers will experience the financial gains before handset manufacturers and these companies will likely determine the 5G playing field.