The latest research report from Omdia, a market research firm (formerly Ovum, now renamed, for comments on the end of the article), says that despite industry concerns about use cases and coverage, 5G will become the fastest-growing mobile technology for users, with 63 million users expected by the end of 2020. This historic increase is due entirely to two factors – an increase in the number of operators launching 5G networks worldwide and a rapid decline in the prices of 5G smartphones and other 5G terminals.
In early January, Samsung announced that it had sold 6.7m 5G smartphones in 2019, two-thirds of them in the last three months of last year. That’s perhaps not surprising given Samsung’s addition of 5G to the Galaxy A90, making it the cheapest 5G phone, costing as little as a few hundred dollars. The cost of buying a 5G smartphone fell 9.2 percent from the second quarter of 2019 to the third quarter of 2019, according to the Ovum 5G Terminal Device Tracker.
Figure 1: The average total cost of buying a different brand of 5G smartphone.
Source: Ovum Digital Consumer Insights 2018.
Omdia expects this rapid downward trend to continue in 2020 and beyond, as several separate factors drive the price.
First and foremost, there is fierce competition for 5G modem itself. Qualcomm almost monopolized 4G modems nine years ago, and now both Samsung and Huawei own 5G modems from their own chip companies. After acquiring Intel’s modem business in 2019, Apple may also join them in building its own 5G chips, and MediaTek will begin selling 5G modrm and offering other manufacturers options.
Daniel Gleeson, chief consumer technology analyst at Omdia, said the competition would be the main reason for the collapse in 5G prices in the coming years. Samsung, Apple and Huawei are the three largest smartphone brands, so the ability of these companies to conduct in-house research and development will put enormous pressure on Qualcomm to stay ahead of performance and price, or lose market share in the lucrative flagship terminal.
Second, competition among smartphone makers has eliminated any excuse for a “5G premium”. Brands, which focus primarily on open-market countries, are using 5G (and Huawei’s dispute with the U.S. government) as an opportunity to partner with operators and enter new markets. Xiaomi, OPPO and OnePlus have all gained ground in the carrier’s early 5G offerings, making it a cheaper option than Samsung and LG. As Samsung lowers its product prices, the brands will seek to consolidate that position by pushing prices down further.
Finally, Qualcomm’s approach to licensing and chipsets could change significantly as a result of u.S. lawsuits. Qualcomm lost an antitrust lawsuit in 2019 after the company asked its chip customers to accept expensive patent licensing fees. The case is pending, and if finalized, it could significantly reduce the patent burden on all mobile technologies, including 5G.
Such a rapid drop in prices would also have an interesting impact on non-mobile 5G terminaldevices such as tablets, headsets and smartwatches, which will become more attractive to manufacturers and consumers as additional network connectivity costs fall.
Omdia expects 5G to provide a small boost to smartphone sales, but the smartphone market is nearing saturation and non-smartphone devices must be considered if manufacturers and operators are to grow. Making the premium generated by the extra network connection more affordable will be an important factor in persuading consumers.
Note: Omdia is a leading global technology research organization, a world-leading technology research organization, which was formed by the merger of Informa Tech’s research division (Ovum, Heavy Reading and Tractica) with the acquired IHS Markit Technology Research Division. 】