5G phones are coming (and they ain't cheap!)

07 Jan 2019

With mobile carriers accelerating their 5G rollouts, the race is also on to be the first company with a 5G phone. A flurry of Android 5G phones are expected to hit the Asia market in 2019.

Qualcomm president Cristiano Amon confirmed this October that the industry is on track to launch 5G handsets next year, saying that over 20 handset makers have committed to release Qualcomm-powered 5G phones in the first half of 2019. These include Asus, Fujitsu, Google, HMD Global (Nokia), HTC, inseego, LG, Motorola, NetComm Wireless, NETGEAR, OnePlus, Oppo, Samsung, Sharp, Sierra Wireless, Sony, Telit, Vivo, Wistron NeWeb Corp, Wingtec, Xiaomi and ZTE.

Chinese handset maker OnePlus, for instance, has confirmed to launch a 5G phone for UK mobile operator EE in early 2019.

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Samsung has also confirmed it is working on its 5G smartphone, with plans to provide a 5G phone to AT&T and Verizon sometime next year.

China’s Huawei promises that its first 5G phone will come with a foldable screen, according to Ken Hu, the company’s rotating chairman.

“So let’s imagine, with much faster speed - 100x faster than today - you’re going to enjoy an amazing high-definition video experience with a big screen on your smartphone,” Hu told delegates attending the World Economic Forum 2018 in September.

Finally, it should come as no surprise that Apple’s first 5G smartphone definitely won’t be hitting the market next year. According to various media reports, Apple will release a 5G iPhone in 2020 powered by Intel’s recently announced XMM 8160 5G modem.

5G phones won’t come cheap

But how much will consumers pay to get their hands on a 5G? While vendors have yet to reveal details about the pricing, research firm Strategy Analytics predicts that 5G smartphones will carry wholesale costs of more than $750 when they are introduced in 2019, translating to retail prices of as much as $1,000 or more.

The researcher adds that 5G device prices will decline at a much slower pace than those of 3G and 4G devices, and that subsidies will be necessary to make 5G phones affordable on the mass market.

Ken Hyers, Strategy Analytics’ director of emerging device technologies, calls it ‘magical thinking’ to imagine consumers will rush out to buy very expensive 5G phones. He cites Strategy Analytics’ research which finds that only 9% of Chinese customers buy smartphones with a wholesale price of more than $500.

The research firm also argues that the transition to 5G will result in a reordering of the current list of top smartphone manufacturers, just as it happened with 2G, 3G and 4G.

It advises that vendors must strive to be global and minimize market specific SKUs where possible, building from a global platform or be local, focused and niche. The “profit drain zone” is positioned at the bottom of the U-curve with volume between 40 and 60 million where profits are almost impossible to realize.

“5G has many more risks than rewards for most vendors in the short term. We believe caution about the speed of 5G ramp up and slope of the price/performance curve for devices is critical,” says senior analyst Ville-Petteri Ukonaho.

“Unlike current generation smartphones, 5G devices will require a number of changes in order to provide the best performance, including new chipsets and additional antennas. 5G devices will be the most complex and expensive ever.”

The research firm says Lenovo-Motorola, LG, and ZTE are among those vendors in “perilous positions” and must carefully execute a pragmatic 5G strategy or risk surging losses. Even Samsung and Huawei each have challenges to maintain growth with 5G due to their limited presence in China and USA respectively.

“The history of the mobile industry teaches us that with every transition from one wireless generation to the next at least one top vendor has found itself wrong-footed by the transition and has seen its market share collapse (i.e. Motorola and Nokia),” SVP David Kerr says.

“Could Huawei be next? Or will Samsung’s lack of presence in China see it vulnerable?”

This article first appeared in Telecom Asia December 2018 Edition

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