As Saxo Bank's Peter Garnry recaps yesterday's Apple event, the company introduced its iPhone 11 which now comes in three different versions with cheapest version selling for $699 which a price cut aimed to lure smartphone buyers back into Apple's realm (at the expense of a drop in Apple's ASP). The stock market reacted positively to the news, but criticism has surfaced that Apple is falling behind as the new iPhone 11 is not coming with a 5G integration which makes almost impossible for Apple to have growth in China where local smartphone makers such as Huawei is introducing smartphone with 5G integration. Beginning in the second half of 2020 this will be a constraint for Apple.
Why does 5G matter?
To answer that question, we have excerpted from a recent Deutsche Bank report explaining "how 5G will change your life."
Amidst hype and high expectation, the 5G roll-out has begun. It recently launched in Korea, while the US, UK and others have commenced trial versions and China has said it will soon grant commercial licenses for its network. To take advantage, companies such as Samsung and LG have launched 5G smartphones. In total, $160bn is being invested annually in the construction of 5G networks according to GSMA, the mobile network operators' association. It expects 5G to contribute $2.2tn to the global economy in the coming 15 years, just a little less than the size of the UK economy.
Yet, for all the fanfare, many in the industry are quietly nervous. Among other things, one of the biggest concerns is that there is no 'killer application' ready and waiting to be unleashed that requires the 5G network. That trepidation stands in direct contrast to the 4G and 3G roll-outs. The former allowed good-quality streaming video and the latter photo sharing and other types of multimedia. Both were a boon for hardware, software, and network providers.
This is backed up by our dbDig primary research1 which shows that in the US, only ten per cent of customers are prepared to pay $6 or more for 5G services and one-quarter of customers say they are not prepared to pay any extra at all. Yet when we look at China a different picture emerges. Indeed, two-thirds of Chinese customers are willing to pay for 5G if it means quicker uploads to social media or the ability to play mobile games with very low load time. That is double the proportion of US customers who are willing to pay for the same services. It seems part of the reason is that the Chinese are far more likely to report issues with signal strength when they are in rural areas. Given smart phones have become a crucial engagement tool in rural Asian areas (see our piece titled, 'The emerging market technology skip') the willingness of the Chinese to upgrade is not surprising. However, the future for 5G smartphone service in developed markets seems more uncertain.
On top of the concerns about user uptake are the voices of health professionals, environmentalists, and politicians who worry about radiation emissions. Take Brussels, for example, a city with very strict radiation regulations. There, a pilot 5G project was halted on health grounds with the environment minister proclaiming, "The people of Brussels are not guinea pigs." In Switzerland, authorities have commenced a 5G radiation monitoring programme. And all this comes before considering the stern political rhetoric that has accompanied the choice of Chinese suppliers for 5G infrastructure (see our piece titled, 'The politics of 5G').