The telco industry might be in the limelight for the moment, but 5G looks like it is now taking a breather as the coronavirus pandemic continues to wreak havoc on society.
2020 was supposed to be the year 5G started to pay dividends. Telcos have been promising financial rewards in the enterprise segments, enterprise customers have been envisioning connectivity-based business models and the vendors were supposed to be supplying the technology to underpin it all. The party might have to be delayed by another year.
“At Omdia we are revising our 5G forecast,” said Omdia 5G Practice Leader Dario Talmesio. “There are many factors to be looked at, including consumer confidence, business confidence, disposable income, employment data, availability of networks, availability of devices, retail environment, marketing budgets. all these are converging to one direction which is very negative for 5G eMBB.
“We previously believed that 2020 was going to be the real year of 5G. This is no longer that case under the current circumstances.”
Everyone in the industry has been building towards 5G. The chip makers have been scaling capabilities quickly, the infrastructure vendors have been fine tuning base stations, cloud companies are rapidly growing footprints and devices manufacturers have been planning launches. But the reality is attention has been drawn elsewhere.
Speaking at a media briefing, Huawei SVP Victor Zhang said the telcos are prioritising projects to improve resilience in existing networks as more customers work from home. There is only so much which can be done to continue the 5G rollout as engineers are forced to prioritise the network strain which is threatening today. 5G deployments will slow down as a result.
This is not necessarily a huge consequence for some vendors, Huawei and Nokia for instance have fixed broadband business units, but it might cause headaches for those who are focused on mobile.
Ahead of the Ericsson Annual General Meeting (AGM), which will take place virtually, CEO Börje Ekholm suggested there was no material impact to the firm just yet. Pointing to the 86 commercial 5G agreements and 27 live networks, Ekholm is seemingly trying to build confidence in the business but it becomes difficult to ignore the logic behind a 5G slowdown.
Attention from the telcos is being diverted as reliable broadband and 4G networks are the gold standard during the outbreak, but you have to question whether there is the 5G demand from the consumer to underpin aggressive deployment strategies from the MNOs.
Looking ahead, September would have been a very interesting month for 5G excitement thanks to launch of Apple’s flagship device for the year. This would have been a 5G-capable smartphone and would have stirred the iCultists into a frenzy. Many analysts have suggested this launch could push 5G into the mainstream, but reports have been circulating that claim the bonanza could be scaled back.
It was suggested Apple would launch four devices in the autumn, ticking the boxes for multiple demographics, but supply problems for components might be the spanner in the works. What is worth noting is that there are also reports Apple is on track. As with everything associated with the media-shy iGiant, mixed reports are muddying the waters.
Looking at the wider smartphone segment, the demand is not likely to scale over the next few months to completely justify an aggressive 5G rollout.
If the telcos are to rationalize additional expenditure on 5G deployments, there would have to be customers on the other side to make use of the shiny, speedy networks. As it stands, some enterprise customers are prioritising manpower and investments towards existing day-to-day operations and also trying to reduce out-goings as a recession looms on the horizon, while consumers are also becoming increasingly cash conscious and with retail locations closed, sales are likely to become less common.
Last week, Counterpoint Research suggested smartphone shipments had declined by 14% over the course of February, and it would be very fair to assume the trend would continue (if not worsen) through March and beyond as more self-isolation measures are introduced around the world. New smartphone purchases are likely to be delayed for many for various reasons, eroding the demand for 5G connectivity.
Another very obvious issue which the telcos may well face is the sourcing of products and components. Although the main suppliers have been very vocal in suggesting their manufacturing capabilities are secure, that could change in a matter of weeks. These are companies who could be thrown off course by their own supply chains, and even if there have been business continuity measures put in place, we are heading to the realms of the unknown. Predicting the status quo of tomorrow and the impact of this pandemic is becoming almost impossible.
As it stands, the telcos are being forced to prioritise investment and attention elsewhere, forecasts on the number of 5G capable devices are likely to be lowered and delicately balanced supply chains could be thrown off course in a matter of days. The Chinese telcos could certainly counter this assumption with their own deployments, but it would be a fair to bet on 2021 being the new Year of 5G.