After years of publicity and anticipation, the term “5G” is nearly ubiquitous in our society nowadays. Regardless of the noise surrounding the topic, 5G is here to stay, and it is important for consumers, businesses, and investors alike to understand the whole spectrum of implications that this technology will have in our lives. It is common to find people whose expectation is limited to the fact that 5G should be more advanced than 4G. In this article, which leverages the expertise accumulated by BITA in its coverage of this thematic investment sector, we will not only explore some advantages that 5G offers to consumers and businesses but also the derived implications and opportunities for investors.
5G Technology in a nutshell
5G stands for the fifth generation of wireless technology, which brings significantly faster speeds to wireless devices. This generation improves upon and complements 4G technology, with each iterative generation bringing changes such as enhanced capacity, lower latency, and increased bandwidth. Verizon, America’s second-biggest Telecommunications conglomerate, explains the benefits of 5G as:
“[…]quicker downloads, much lower lag… the connectivity benefits of 5G are expected to make businesses more efficient and give consumers access to information faster than ever before.”
However, 5G has enormous potential for businesses that goes far beyond the ability to stream videos faster.
What is the significance of 5G, apart from faster speeds?
The real importance of 5G stems from its ability to enable applications and services in a variety of industries, which would otherwise not be feasible with the current infrastructure. Verizon believes some of the key uses for 5G will come from other areas: “Connected cars, smart communities, industrial IoT, immersive education — they will all rely on 5G networks.”
Proponents of the technology often highlight that 5G can be the main driver of the Fourth Industrial Revolution, and that it can help transform the world’s economy:
“It is estimated that by 2035, 5G will enable $12.3 trillion of global economic output and support 22 million jobs worldwide, enabling a series of game-changing applications… significant advances in autonomous vehicle technology … connected appliances that help to automate tasks around the house… major improvements in 3D holograms, virtual reality and augmented reality applications… smart cities with 5G in public spaces, remote surgery, better traffic control and many other applications that depend on nearly instantaneous response time.”
5G is closely interrelated with other major Megatrends, touching on some of the sectors with the largest potential in the coming years, such as autonomous vehicles, IoT and AR/VR. So while 5G in the simplest terms will allow consumers to browse the internet faster, it will undoubtedly drive the future of communication and help accelerate the adoption of exciting future technologies.
5G Market Analysis
Many companies stand to benefit directly from the rollout of 5G, which makes it an exciting time for investors to explore unique investment strategies.
US-based Qualcomm is one of the biggest players involved; it creates software and chips for wireless equipment and has significant licensing sales with Apple and others. Ericsson, based in Sweden, has invested heavily in 5G; it has a 27% market share in 2G/3G/4G, and is the first company to deploy 5G networks across four continents. Broadcom, Verizon, T-Mobile, American Tower Corp., Crown Castle International Corp., Analog Devices, and Nokia, among others, are companies to follow in the space.
The Wall Street Journal also highlights five smaller companies in the 5G space that investors should keep an eye out for Peloton Technology, which deals with Automated truck platooning, Edgybees, which is in the AR space, The Void, which is in the VR entertainment space, ShotSpotter, which has gunshot location technology for cities, and Hah Parking, which helps with parking assistance.
In terms of rollout, South Korea, home of Samsung, leads the way for now, followed by China and the US. As more 5G products are introduced, with companies like Apple releasing their first 5G iPhone last month, we should expect the infrastructure for 5G to develop heavily as demand increases. It will also be exciting to see how demand and infrastructure will grow based on the business applications of 5G, for uses such as autonomous vehicles.
5G technology as an investment theme
5G is bound to create a positive financial performance for a series of providers and suppliers. Companies operating carrier-grade networking equipment, mobile networks, satellite-based communications, enhanced mobile broadband chips, radio technology, test and optimization equipment, network functions virtualization, fiber optic cables, or cell towers are well-positioned to benefit from the growth of 5G.
ETF’s, Mutual Funds, and other passive investment wrappers can help both retail and institutional investors alike to add this exposure to their portfolios in an easy and cost-efficient way.
The critical part, differentiating between a pure exposure or a generalistic exposure, lies of course behind the research and the selection mechanisms behind these investment vehicles, mostly done by the underlying index providers.
At BITA, we empower asset managers, product issuers, and other index providers in the launch of innovative thematic strategies, thanks to our expertise in researching and identifying companies’ exposures to themes.
Our proprietary Thematic Database has both a 5G and a “Communications Tech” segment, which can be leveraged for the creation of innovative, pure exposure indexes. Also, our custom indexing service can be used by clients to quickly develop and launch new passive investment vehicles targeting these exposures.
If you would like to get access to our database, use our data collection services, or our custom indexing services, please visit our website, www.bitadata.com, or contact us via email: info@bitadata.com
