Every cellular generation transition has led to significant personal and economic transformation, unlocking new use-cases, applications, and benefits. The 4G network architecture and spectrum (600MHz to 2500 MHz) evolution were a step change in how mobile users communicate (video calls, instant messengers, consuming richer content (buffer-free OTT video, music) to commerce (O2O revolution from 15 mins groceries to hailing a cab) and more.
However, 5G network architecture along with more spectrum (sub-6GHz and especially mmWave 24GHz-100Ghz bands) is further elevating mobile experiences and performance with substantial network capacity, Gigabit throughput speeds, as well as lower latency to enable the tactile internet. 5G mmWave is key to deliver the “true 5G” promise. Tracking how the 5G mmWave ecosystem is progressing from components, devices and the network perspective has become imperative for stakeholders to strategize and deliver the “true 5G” benefits. The following are trends in 5G mmWave progress globally:
1. Adoption of 5G mmWave Gaining Momentum.
The USA has been spearheading mmWave 5G deployments globally, with Australia, Japan picking up along with key operators across 40+ countries which now have access to 5G mmWave spectrum and are either in the pre-commercialization or commercialization stages. These includes key mobile markets such as India, Korea, Taiwan, China, Italy, and others which will see active 5G mmWave deployments over the next couple of years to complement the sub-6GHz deployments focusing on 5G coverage with the capacity, throughput, and low latency 5G mmWave spectrum offers.
The overall economics of the 5G mmWave deployments offer solid business case for mobile operators to invest in the spectrum and network deployment.
- 5G mmWave: Ecosystem & Economics Becoming Attractive
- 5G mmWave: Ecosystem, Economics Becoming Attractive (Part 2)
The leading smartphone manufacturers have been shipping 5G mmWave phones for the last three years. For example, three in four 5G smartphones selling in USA support 5G mmWave spectrum bands and capabilities. We estimate that cumulatively more than a billion 5G mmWave smartphones will ship over the next five years globally as the 5G mmWave coverage densifies.
2. Little correlation between smartphone pricing and the presence/absence of 5G mmWave
The cost delta for 5G mmWave+Sub-6GHz and 5G sub-6GHz-only phones has narrowed significantly. Initially there was a substantial cost premium to equip a smartphone with mmWave capability. This has now come down to a $10-$20 BoM cost premium and will likely decline further. But for phones in the price bands above $300, the cost delta has become relatively insignificant thanks to the way OEMs are structuring their product portfolios and margins to play with. We therefore expect that 5G mmWave will become a de-facto feature for premium to mainstream 5G smartphones in the next few years. The next phase will be the increasing use of 5G mmWave in even low-end devices. 5G mmWave deployments will likely become ubiquitous towards the end of the decade, just before the launch of 6G networks.
Component vendors such as Qualcomm and OEMs such as Apple, Samsung, Moto, Sharp, Fujitsu and OnePlus have been at the forefront of adding 5G mmWave capabilities to smartphones to support carriers’ 5G deployments. Now, when we look across global pricing, we see little differential between mmWave and non-mmWave devices. For example: Apple’s iPhone 13 128 GB launched in the USA as a 5G mmWave+sub-6GHz version and it is cheaper than the 5G sub-6Ghz-only version selling in other markets globally. We have seen this trend with Samsung and Google where there is little difference between the two versions and, if anything, the sub-6GHz-only version is more costly. Some of this is to do with commercial decisions and some to do with foreign exchange, but the net result is that there is little correlation between smartphone prices and the presence of or absence of 5G mmWave capability.
So, price differentiation between sub-6GHz-only devices and those that also support mmWave has become a non-issue. This is in part because relatively few countries have deployed mmWave, so models featuring mmWave have not competed side-by-side with non-mmWave devices. And furthermore, OEMs are smartly managing their portfolios on a global basis to neutralize cost differences with growing volume scale as seen in the below chart. The higher scale also allows OEMs to price the 5G mmWave SKUs without charging a significant premium.
5G mmWave thus is also going to be a “differentiating feature” for OEMs. OEMs will start adding 5G mmWave support in their smartphones in the markets where 5G mmWave network is going to roll out in the near future to position the smartphone model as “future proof” and be ready to deliver “true 5G” with good coverage. This is going to be like the current trend we are seeing among OEMs in markets (e.g., India, SEA, Europe) where 5G has not yet rolled out in the network, but almost all $300+ phones support 5G capabilities with more than 10 5G bands, marketed as “globally future proof”. This approach is likely to be extended to mmWave devices.
3. 5G mmWave Smartphones Awareness & Preference Growing
Trying to understand the consumers’ attitudes and preferences towards 5G mmWave phones, we ran a survey in the USA where consumers are not hesitant to opt or switch to a 5G mmWave phone and data plan. Key findings below:
- Sixty percent of the users checked while purchasing their 5G smartphone if it had 5G mmWave capabilities, which highlights the growing awareness of the technology.
- For those users that were using a 5G mmWave smartphone (17% of total), the number one reason for their purchase was to subscribe to the high-speed 5G mmWave plan.
- The above reasons for purchasing 5G mmWave smartphone also portray that the existing 5G mmWave users did not think about the price of the 5G mmWave smartphone while buying but the high-speed plan or just bought the phone which was a default option for the chosen plan were key.
- Further, the top two reasons for almost half or more of the users who bought 5G mmWave plan were that they either already owned a supporting 5G mmWave smartphone or best suited their heavy usage which also exemplifies the pricing of the device is not one of the reasons or barriers.
- The top three reasons for consumers who have not bought a 5G mmWave plan yet are: They are happy with their current 5G network based on their current data usage; their carrier is not offering the 5G mmWave service or their current handset is not compatible.
- However, 43% of the users plan to subscribe to 5G mmWave service next as they start seeing more of the “true 5G” benefits.
- 5G mmWave is going to be the key for OEMs, carriers to deliver the “true 5G” promise from speeds, latency, and capacity perspectives.
- The cost differential between a mmWave+sub-6GHz and sub-6GHz only 5G smartphones is narrowing with growing scale, allowing OEMs to offset any extra costs through smart portfolio management.
- In many cases, 5G mmWave smartphone models are priced more cheaply than the sub-6GHz only version in other geographies
- This means there is no correlation between the 5G handset pricing if it is a 5G mmWave or a sub-6GHz-only smartphone.
- An increasing percentage of consumers are beginning to actively opt for 5G mmWave smartphones to enjoy the “true 5G” benefits and device or plan costs is not a barrier
- The percentage of consumers who are using 4G or 5G sub-6GHz-only plans but prefer to upgrade to a 5G mmWave service and smartphone is encouraging.
- Its up to the device OEMs and carriers to adopt 5G mmWave capability and coverage respectively as a differentiator and put their best foot forward in offering users the “true 5G” experience to deliver and capture maximum value.
- This will also help avoid any cognitive dissonance among users if the offering is not “true 5G” or “future proof” which could lead to churn.