If it lives up to the hype of its proponents, 5G could act as the holy grail of broadband technologies.
By that, I mean fast enough to provide last-mile broadband connectivity to homes and businesses; powerful enough to handle billions of connected devices, many of which will be constantly or almost constantly transmitting data; efficient enough to support weeks of battery life for low-power hardware containing 5G modems; and still capable of handling the mobile use cases serviced by 3G and 4G networks.
Such a feature set would make 5G well-suited to supporting the proverbial Internet of Things -- the web-connected embedded devices whose ranks are expected to reach the tens of billions in time. 5G's IoT-readiness has little to do with its top speeds, even though transfer rates well above 10 gigabits per second have been recorded in lab tests. Many future IoT devices -- think products such as agricultural sensors, medical monitors and vending machines -- will require very small amounts of bandwidth.
Rather, 5G's value to IoT hardware deployments mostly revolves around:
- The large increases in network capacity 5G networks will provide relative to 4G networks. This will allow them to simultaneously handle the many embedded devices whose individual data transmissions may not amount to much, but whose collective capacity needs will be massive. Given 5G's potential as a last-mile broadband technology, a lot of these devices probably won't directly communicate via 5G modems, but will rely on Bluetooth or Wi-Fi links that feed into 5G connections.
- The ability to use much less power than 4G networks to transmit or receive a given amount of data. This could be a big deal for many battery-powered sensors, radios and field devices that businesses want to avoid having to frequently recharge.
- Support for much lower latency -- the minimum amount of time needed for a packet of data to move across a network -- than 4G networks. This could be valuable for businesses relying on 5G connections to get a real-time view of how various systems and devices are functioning.
The 5G Infrastructure Public Private Partnership (5GPPP), one of the groups responsible for creating 5G standards, wants 5G networks to provide "1000 times higher wireless area capacity" than what existed in 2010. While that target should be taken with a grain of salt, it gives some idea of the big capacity improvements 5G will eventually deliver.
The 5GPPP is also aiming for a 90% drop in power consumption for a given amount of data traffic relative to 2010 levels, an 80% decrease in latency and much faster service deployment times. All while delivering 99.999% (five nines) or greater reliability and supporting devices moving at 500 kilometers per hour (311 miles per hour).
It's a tall order that requires big processor and radio technology improvements to be fulfilled, and that's why 5G network deployments aren't expected to kick off in earnest before 2020. It's also why many of the first 5G trials involve fixed-wireless networks relying on high-frequency spectrum that, while providing a lot of bandwidth, historically hasn't been a good fit for mobile networks.
But once 5G mobile deployments start ramping, many chip and service providers should benefit. Mobile chip and licensing giant Qualcomm (QCOM) has been making big investments in 5G radio technologies it hopes to collect royalties on, and argues that the modem and RF subsystem improvements required by 5G play to its strengths. And with the help of recently-acquired British chipmaker CSR, Qualcomm wants to be a major supplier of Bluetooth, Wi-Fi and GPS chips for IoT devices.
While outlining his company's long-term strategy in April, Intel (INTC) CEO Brian Krzanich proclaimed that his company, which is believed to be supplying 4G modems to Apple (AAPL) for the iPhone 7, will have a 5G leadership position "because of our technological strength to deliver end-to-end 5G systems, from modems to base stations to all the various forms of connectivity that exist today and will exist tomorrow."
Intel could also benefit from the fact that 5G networks are expected to make heavy use of network functions virtualization (NFV), which allows proprietary telecom equipment to be replaced by commodity servers running processors from Intel and others. The company has been arguing for years that NFV will be a big opportunity for its server chip division.
Meanwhile, the proliferation of 5G-capable IoT devices will expand the addressable market of RF chip suppliers such as Skyworks (SWKS) and Qorvo (QRVO) , which currently depend heavily on smartphone sales. And for mobile infrastructure giants such as Nokia (NOK) and Ericsson (ERIC) , 5G rollouts can't come soon enough, given how 4G infrastructure sales have begun slumping.
For carriers such as AT&T (T) and Verizon (VZ) , the spread of IoT devices with 5G modems will boost the number of products they can provide connectivity services for. Already, AT&T is seeing strong uptake for its 4G connected-car services. But the number of billed devices could be limited by the use of long-range Bluetooth and Wi-Fi radios that hook up with last-mile broadband connections. And when it comes to fixed broadband, 5G is both an opportunity and a threat, since it opens the door for companies like Alphabet's (GOOGL) Google to challenge telco/cable duopolies.
For larger tech and telecom companies in general, it's also worth remembering that new 5G-related revenue streams may still only account for a fraction of their total sales. Still, when the dust settles, the devices and services that will be enabled by 5G should give many of these companies a real chance to expand their addressable markets.
Just be ready to wait a few years for it to happen.