5G connections (is that the same as 5G subscribers?) will reach well over 1 billion next year, despite the threat of component shortages hitting the supply chain this Christmas, according to a new forecast by CCS Insights. Total 5G connections will triple this year to 637 million, before more than doubling in 2022 to 1.34 billion, CCS Insight predicts. The market research firm says that China will continue to lead in volume terms, at least for the next few years.
Smartphones with 5G capability have until now largely remained sheltered from component shortages affecting the global mobile phone market.
“In another turbulent year for the mobile phone market, supply constraints in low- to mid-tier segments, paired with weak demand in emerging markets, have dampened sales. But 5G-enabled devices have so far continued to find their way to the hands of people in the world’s most advanced markets, with 560 million 5G-capable smartphones projected to sell in 2021”, notes Marina Koytcheva, vice president of forecasting at CCS Insight. But concerns about the supply of high-end devices, including the iPhone, during the Christmas quarter remain and pose a risk to adoption of 5G, even if that risk is temporary.
Telecom operators in Western Europe, North America, China and other advanced markets in Asia continue to roll out 5G networks, overcoming difficulties posed by the Covid-19 pandemic, uncertainties about the role of Chinese network equipment-maker Huawei, and an unstable macroeconomic environment.
In South Korea, 5G is on track to account for 30% of mobile connections by the end of 2021. Strong mobile phone sales in the run-up to Christmas will help the US achieve 25% penetration, surpassing the Chinese market. Although China was an early trailblazer for 5G, shaky demand for smartphones in 2021 means that 5G is forecast to account for only 24% of cellular device connections by the end of the year.
In contrast, Western Europe is still lagging some other markets, limited by delayed spectrum auctions in some countries, slow government decision-making about the role of Huawei, and weakened demand for mobile phones amid the pandemic. Although the speed of 5G roll-out is improving, this relatively gradual start means that 5G won’t account for more than half of cellular device connections in the region until 2024.
Once the spectrum is allocated and telecom operators start deploying 5G networks, how quickly people adopt 5G depends on their willingness to buy 5G-capable devices. “Things are looking up on that front; the global mobile phone market is projected to recover in 2022, and prices of 5G handsets continue to fall steadily. Our forecast for 3.6 billion 5G connections worldwide by 2025 is still firmly on track,” says Koytcheva.
In addition to mobile phones and related devices such as tablets, CCS Insight has identified two other drivers for 5G adoption: industrial cellular Internet of things devices and fixed wireless access (we agree). Both have strong prospects, despite being projected to contribute only 9% of worldwide 5G connections in 2025. Adoption of 5G in industrial applications is seeing positive momentum in China, and is set to get a boost in the US when carriers start switching off their legacy 3G networks.
Fixed wireless access remains a niche technology for now, mostly complementing fibre broadband, but some network operators are increasingly turning their attention to this opportunity with business users, recognizing that the potential revenue per connection could be significantly higher than that from connecting households.
A summary of CCS Insight’s new forecast for 5G connections is presented in the chart below:
Source: CCS Insights
The publication of nine-month 5G subscriber numbers from two of China’s three mobile operators is quite revealing (if true?).
- China Mobile is adding 5G customers at a rate of around 11 million per month according to its latest financial report. The world’s biggest mobile operator had 160 million 5G network subscribers at the end of September, up from 127 million three months earlier.
- China Telecom, which is due to report on Friday, had 146.6 million 5G package customers at the end of August. A “back of the envelope” calculation by Mary Lennighan of telecoms.com suggests there are more than a quarter of a billion true 5G subscribers in China.
CCS Insight predicts that the U.S. will leap ahead of China in 5G on the back of strong smartphone sales in the run-up to Christmas, giving it 25% 5G penetration to China’s 24%, the latter hit by shaky demand for smartphones this year as noted above.
More details of CCS Insight’s extensive 5G service can be found at: https://www.ccsinsight.com/research-areas/5g-networks