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Market Insight

After a full year with 5G, what's next? Add scale by lowering 5G device costs.

December 05, 2019

Wayne Lam Wayne Lam Principal Analyst, Mobile Devices & Networks

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As we approach the end of a year which '5G' has become a house hold word, the wireless industry is looking forward to accelerated growth in 2020.  In order to achieve that, wireless carriers need to continue to deploy 5G networks, define use-cases which brings value to their customers as well as their bottom line and work with device makers to lower the cost of 5G phones.

Thus far, 5G has been a feature reserved for super high-end smartphones category [excluding luxury brands] which retails for upwards of $2500, nearly 5 times the cost of a typical mass market smartphone.  Some of the prices are inflated due to other new technologies introduced alongside such as flexible or foldable displays.  However, even after removing those outliers, first generation 5G smartphones still retails in the range of $800-$1400.  Of course, these devices command a high price due to the newness of 5G as well as the scarcity of major chipsets and RF components.  The industry is expected to drive those cost down as 5G scales up.

5G smartphone designs follow the same playbook as the first LTE smartphones.  Nearly a decade ago the first batch of 4G designs were costly and power inefficent.  Later, more integrated silicon solutions help to drive down the cost of LTE smartphones to more rational pricing.  In fact, today in India, a consumer can pick up a 4G Jio Phone for less than $15. Of course, it is not fair to compare smartphones to featurephones but does demonstrate that over time wireless chipsets become commoditized and plentiful, allowing OEMs to drive down cost of LTE devices for the masses.

First generation 5G chipsets has a high silicon density.  That is to say, the 5G chipsets aren't mature enough such that more silicon is needed to accomplish what is required of existing  chipset designs.  We discussed this in our August piece on 5G chipset design. In 2020, we will begin to see second-generation 5G smartphones come to market which are endowed with more efficient designs.  In order to address the larger global market, however, 5G phones will have to span a wider range of quality and costs.  That won't be possible until 5G chipsets come down in costs.

Therefore, it was not a surprise that Qualcomm introduced the Snapdragon 765 this week in their Tech Summit with an eye towards making 5G phones more accessible to more people.  The SD765 drives down silicon cost and power requirements by integrating previously discrete silicon parts into one cohesive chip called a SoC (System on Chip).  This design is does compromise high end feature sets of the more costly designs but that's just plain economics.

The Qualcomm Snapdragon 765 is, by its naming convention, a tier below that of the flagship Snapdragon 800 series and only carries a subset of the capabilities of the Snapdragon 865 which will power the flagship devices in 2020.

Creating a lower cost chipset for products in the second year of a new 'G' introduction is, by any measures, very optimistic.  In fact, the whole of 5G was commercialized nearly one year earlier than expected as ecosystem player align to better coordinate the launches than from any previous 'G' transitions. 

So what do we expect in 2020? We will likely see 5G smartphones come down in price to about a low of $400 with the use of integrated chipsets such as the Snapdragon 765.  Samsung also has announced their own mid-tier 5G SoC, Exynos 980 and just last month MediaTek released details on their first 5G SoC, Dimensity 1000.  These competitive solutions and others not yet announced will be the critical ingredient in the productization of lower cost 5G smartphones in 2020 and beyond.

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