October 18, 2018
Strategy Analytics: The 5G Hype Cycle is About to Run into a Hard Truth: Subsidies Needed!
5G Device Prices Limit Adoption in Short Term but top Vendors face disruption.
BOSTON–(BUSINESS WIRE)–5G smartphones will carry wholesale costs of more than $750 when they are introduced in 2019, translating to retail prices of as much as $1,000 or more. According to a series of newly published reports from the Strategy Analytics Device Technologies practice, 5G device prices will decline at a much slower pace compared to 3G and 4G handsets. Subsidies will be necessary to make 5G smartphones affordable to the mass market.
The report 5G’s Dirty Little Secret: Subsidies Must Return (available to clients here) concludes:
- 5G is not a panacea for the industry ills whether one is an operator or a device vendor. There is a lot of hard work, experimentation and failure likely over the next 5 years.
- There is every reason to think that the transition to 5G will result in a reordering of the current list of top smartphone makers just as happened with 2G, 3G and 4G.
- Vendors must strive to be global and minimize market specific SKUs where possible, building from a global platform or be local, focused and niche. The profit drain zone is positioned at the bottom of the U-curve with volume between 40 and 60M where profits are almost impossible to realize.
- Lenovo-Motorola, LG, and ZTE to name a few are in perilous positions and must carefully execute a pragmatic 5G strategy or risk surging losses. Samsung and Huawei each have challenges to maintain growth with 5G due to their limited presence in China and USA respectively.
Senior Analyst Ville-Petteri Ukonaho commented “5G has many more risks than rewards for most vendors in the short term. We believe caution about the speed of 5G ramp up and slope of the price/performance curve for devices is critical. Unlike current generation smartphones, 5G devices will require a number of changes in order to provide the best performance, including new chipsets and additional antennas. 5G devices will be the most complex and expensive ever.”
Strategy Analytics Confirms mobilityView prediction made earlier this year
mobilityView went on the record months ago that 5G device prices would be considerably more expensive than current 4G/LTE equivalents and the pricing disparity will NOT go away quickly.
We anticipate that due to the vagaries of 5G and how they are realized on the device from an RF and spectrum perspective that on a like for like basis comparing handset prices at the same moment of the technology adoption curve (“x” months from initial deployment) there will be a permanent 30% delta between 4G/LTE and 5G devices.
There are many reasons why operators are now having both their B2B and retail customers experience the full cost of the device hardware; and one of them is to educate their customers on hardware sticker shock.
Hardware prices continue their march upwards…. I wonder how business owners will be feeling about continuing to fund 100% of the hardware costs when 70%+ of the usage of said hardware is personalBack