singaporeen
Unlocking 5G’s potential

Unlocking 5G’s potential

03-12-2020 | Yearly outlook

We believe 2021 will be an inflection point for 5G – and a select group of companies will reap the fruits of this powerful shift. In 2020 Apple joined the likes of Samsung and Huawei as it presented its first smartphone capable of connecting to 5G mobile networks. Consumers can now choose from a broad range of 5G smartphones.

  • Sam Brasser
    Sam
    Brasser
    Analyst

At the same time, telecommunication companies in the US, China, Japan, South Korea, and several countries in Europe are activating their 5G mobile networks. Even though 5G network quality is not yet equal to 4G, the availability of 5G smartphones and activation of 5G networks mean that most of the technological prerequisites for 5G adoption among consumers are being met.

Followers of 5G developments often remark that consumer adoption will remain low because there are no blockbuster use cases that appeal to consumers. We partly agree with that statement, in the sense that 5G won’t be a big hit overnight. But this a chicken-or-egg question? When a technology isn’t widely adopted, companies have a lower incentive to develop use cases for that technology, and when use cases are limited, adoption is likely to be slow.

A similar situation occurred with 4G. To illustrate, mobile applications for video and music streaming, social media, and online shopping were in their infancy before 4G arrived. Data speeds were so low on 3G that user experience for those applications was too unsatisfactory to support broad adoption. Now, of course, they have become mainstream.

This article is one of the special topics in our 2021 Outlook ‘Tackling the trilemma’
This article is one of the special topics in our 2021 Outlook ‘Tackling the trilemma’
Read more

A giant leap forward

In a famous commercial from the largest Dutch telecom provider KPN around the introduction of mobile telephony, people on the street were asked in 1998 whether they had a mobile phone. The majority answered they didn’t want one because they could receive phone calls at home, liked to receive mail, or thought it would be annoying to always be reachable.

In 2013, 4G was introduced in the Netherlands, and KPN interviewed the same people. By now they all had mobile phones, and couldn’t do without them, they said. When asked about 4G, they shruggingly replied it wasn’t for them, a waste of time or they were happy with just reading e-mail. One wonders what they will say when asked about 5G. It is much easier to understand in retrospect than to imagine for the future what exactly the impact such a change will have on us.

Do not underestimate the leap forward 5G will bring. 5G’s mobile network technology vastly exceeds its predecessor’s capabilities. Its speed is ten times that of 4G; the network delay (latency) is ten times lower; and it can handle ten times more connections in the same area. Quite impressive. Is 5G making the most of that promises in the real world? Global connectivity measurements show that 5G’s speed is already five to six times higher than 4G’s1. While higher speeds are exciting, we expect improvements in latency and connection density to be the real game changers in terms of enabling entirely new use cases.

It’s about more than just speed

Network upgrades preceding 5G were mainly about speed. In the upgrade to 5G, additional emphasis is put on latency and connection density, to ensure an extremely fast, virtually instantaneous experience for up to a million connections per square kilometer. Cutting latency from 20 to 30 milliseconds to one or two milliseconds has a particularly strong impact on ‘live’ experiences such as streamed video gaming. New latency-critical application such as augmented or virtual reality might become viable on mobile devices as well.

With 5G accelerating the adoption of augmented and virtual reality, the vision of a Metaverse might become reality. This is a real-time, 3D social medium where instead of sending messages and pictures to one another asynchronously, you’re with each other in a virtual world, interacting and having fun experiences which might span anything from purely gaming to purely social experiences.

This vision does not come out of thin air; in fact, it’s backed by Tim Sweeney, founder of Epic Games (creator of the immensely popular game Fortnite). And he’s not alone. Facebook acquired virtual reality (VR) company Oculus in 2014 and has quietly been working on Facebook Horizon, an ever-expanding VR world where you can explore, play, and create.

5G meets the Internet of Things

5G is not just a technology relevant for data-hungry consumers – it has promising industrial applications as well, where wireless connectivity is clearly in demand. As the number of connections increases, wireless connectivity becomes a more attractive option in terms of cost and time consumption than a wired option. According to industrial network company HMS, wireless connectivity accounts for about 6% of the industrial network market in 2019 and is growing 30% annually.

5G’s ability to maintain a very large number of connections in a relatively small area, i.e. connection density, could make it a suitable technology platform for the Internet of Things (IoT). IoT simplifies tracking and controlling moving parts of an industrial operation such as automated guided vehicles, handheld devices, and collaborative robots on mobile platforms, but also components that move through the supply chain and production lines.

In this way, 5G could be a key enabler of further factory automation and a driver of increased efficiency. Its connectivity can increase productivity in industrial operations: using real-time data to communicate with each other, machines can adjust their actions. A current IoT example comes from Ericsson, which has wirelessly connected 1,000 devices in its manufacturing plant in China, enabling real-time monitoring and analysis of production data to guide adjustments to the production plan. Key beneficiaries are IoT companies such as PTC Inc. and connected robotic companies such as ABB and Teradyne.

Robots, cars and machines

5G’s capabilities, high speed, low latency, and high connection density, could accelerate IoT adoption outside factories too. Most new cars now come with an internet connection but are not yet connected to the ‘things’ they encounter such as traffic lights, parking spaces and other cars. A large installed base of things such as sensors, robots, cars and machines interacting through a network such as 5G could generate massive quantities of data.

Companies processing, analyzing, and extracting information from that data create economic value because they improve business decision making for other companies. Large cloud providers such as Google, Microsoft and Amazon already offer solutions for the data created by IoT. Other beneficiaries are data-center owners such as Equinix, CyrusOne and CoreSite.

We believe 2021 could be an inflection point for 5G. Consumers have shown a willingness to subscribe to 5G services. Asia is leading in 5G adoption. In China, over 110m users have subscribed to 5G plans as of June 2020, representing 6.9% of the country’s total user base. South Korea is also seeing increasing adoption, with 5G subscribers now making up 10.6% of the total subscriber base from virtually nothing two years ago. It seems the egg has hatched, and the chick is growing.

Exciting investment opportunities

We can therefore see exciting investment opportunities among owners of digital infrastructure to take action on. For example, densification of our digital infrastructure is needed to ensure 5G reaches its full potential. Networks are being built-out as we write, with 2021 being a key year to increase 5G coverage and quality.

This will give consumers and enterprise customers the user-experience they want. Companies owning digital infrastructure at critical points in the network will benefit, because their assets are increasingly in demand and cannot be avoided when building the 5G network. Selected cellular tower, small cell, fiber cable and data center owners are key beneficiaries at this stage.

As more opportunities slowly become visible, it’s important to bear in mind that as humans, we often underestimate the non-linear change profound technological innovations can bring about. 5G will increase the mobile network’s capabilities with an order of magnitude we cannot imagine.

While use cases are in their infancy, we are confident that innovative growth companies will look at 5G, see its capabilities, and develop use-cases and applications for it. Comfortably invested in digital infrastructure now, we are excited to see which companies are able to unlock 5G’s potential for all our benefits.

1 Opensignal. Date: 2020.

This article is one of the special topics in our 2021 Outlook ‘Tackling the trilemma’
This article is one of the special topics in our 2021 Outlook ‘Tackling the trilemma’
Find out more

Important information

This information is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation.
The contents of this document have not been reviewed by the Monetary Authority of Singapore (“MAS”). Robeco Singapore Private Limited holds a capital markets services license for fund management issued by the MAS and is subject to certain clientele restrictions under such license.
An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

Subjects related to this article are:
Logo

Important Information

Warning/Important note: This website contains information which is only available to qualified investors as defined below. If you are not a qualified investor, please click “I Disagree” to leave the website.

By clicking on "I agree", I declare that: 

  • I am a qualified investor as defined under 1
  • I have read and understood the Terms and Conditions and Disclaimers as described under 2

1 - This website may only be accessed directly or indirectly by the following persons in Singapore:

1) “institutional investor” under section 304 of the Securities and Futures Act (Cap.289)(“SFA”), which means:
(i) the Government; (ii) a statutory board as may be prescribed by regulations made under section 341 of the SFA; (iii) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is (A) to manage its own funds; (B) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or (C) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; (iv) any entity (A) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and (B) whose funds are managed by an entity mentioned in sub-paragraph (iii); (v) a central bank in a jurisdiction other than Singapore; (vi) a central government in a country other than Singapore; (vii) an agency (of a central government in a country other than Singapore) that is incorporated or established in a country other than Singapore; (viii) a multilateral agency, international organisation or supranational agency as may be prescribed by regulations made under section 341 of the SFA; (ix) a bank that is licensed under the Banking Act (Cap.19); (x) a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap.186); (xi) a finance company that is licensed under the Finance Companies Act (Cap.108); (xii) a company or co-operative society that is licensed under the Insurance Act (Cap.142) to carry on insurance business in Singapore; (xiii) a company licensed under the Trust Companies Act (Cap.336); (xiv) a holder of a capital markets services licence; (xv) an approved exchange; (xvi) a recognised market operator; (xvii) an approved clearing house; (xviii) a recognised clearing house; (xix) a licensed trade repository; (xx) a licensed foreign trade repository; (xxi) an approved holding company; (xxii) a Depository as defined in section 81SF of the SFA; (xxiii) an entity or a trust formed or incorporated in a jurisdiction other than Singapore, which is regulated for the carrying on of any financial activity in that jurisdiction by a public authority of that jurisdiction that exercises a function that corresponds to a regulatory function of the Authority under this Act, the Banking Act (Cap.19), the Finance Companies Act (Cap.108), the Monetary Authority of Singapore Act (Cap.186), the Insurance Act (Cap.142), the Trust Companies Act (Cap.336) or such other Act as may be prescribed by regulations made under section 341 of the SFA; (xxiv) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere; (xxv) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors; (xxvi) the trustee of such trust as the Authority may prescribe, when acting in that capacity; or; (xxvii) such other person as the Authority may prescribe.

2) “relevant person” under section 305(1) of the SFA, which means:
(i) An accredited investor; (ii) a corporation the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; (iii) a trustee of a trust the sole purpose of which is to hold investments and each beneficiary of which is an individual who is an accredited investor; (iv) an officer or equivalent person of the person making the offer (such person being an entity) or a spouse, parent, brother, sister, son or daughter of that officer or equivalent person; or (v) a spouse, parent, brother, sister, son or daughter of the person making the offer (such person being an individual).

3) any person who acquires the units [in a collective investment scheme] as principal if the offer is on terms that the units may only be required at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of units in a collective investment scheme, securities, securities-based derivatives contracts or other assets, and if the following condition is satisfied: (i) the offer is not accompanied by an advertisement making an offer or calling attention to the offer or intended offer; (ii) no selling or promotional expenses are paid or incurred in connection with the offer other than those incurred for administrative or professional services, or by way of commission or fee for services rendered by any of the persons specified in section 302B(1)(d)(i) to (vi) of the SFA; and (iii) no prospectus in respect of the offer has been registered by the Authority or, where a prospectus has been registered (A) the prospectus has eAccxpired pursuant to section 299 of the SFA; or (B) the person making the offer has before making the offer 1. informed the Authority by notice in writing of its intent to make the offer in reliance on the exemption under this subsection; and 2. taken reasonable steps to inform in writing the person to whom the offer is made that the offer is made in reliance on the exemption under this subsection.

4) Or otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

If you are not any of the types of persons described above, you are not authorized to enter this website and you should leave this website immediately.

2 Terms and Conditions
You acknowledge that you have read these Terms and Conditions (“Terms”) prior to accessing the website located at www.robeco.com/sg (“Website”) and you agree to be bound by the Terms.  If you do not agree to all of the Terms, you are not an authorised user and you should not use the Website. The Website is owned by Robeco Singapore Private Limited (company registration number: UEN. 201541306Z), which is licensed by the Monetary Authority of Singapore (“MAS”) pursuant to the Securities and Futures Act (Cap.289) (“SFA”) of Singapore, and is managed by Robeco Singapore Private Limited and/or its affiliates (collectively, as “Robeco”). The Website is intended for and should be accessed by institutional investors or accredited investors (as defined under Section 4A of the SFA) of Singapore.  The Website is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the Robeco to any registration or licensing requirement within such jurisdiction.  It is your responsibility to observe all applicable laws, rules and regulations of any relevant jurisdiction. The content contained in the Website is owned by Robeco and/or its information providers and is protected by applicable copyrights, trademarks, service marks, and/or other intellectual property rights.  You may not copy, distribute, modify, post, frame or link the Website, including any text, graphics, video, audio, software code, user interface, design or logos.  You may not distribute, modify, transmit, reuse, repost, or use the content of the Website for public or commercial use, including all text, images, audio and/or video.  Robeco may terminate your access to the Website for any reason, without prior notice. Neither Robeco, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from the access of the Website.  You agree to indemnity and hold Robeco, its associates, directors, officers or employees harmless against any and all claims, losses, liability, costs and expenses arising from your use of the Website due to violation of the Terms. Robeco reserves the right to change, modify, add or remove any parts of the Terms at any time and for any reason.  The Terms shall deemed to be effective immediately upon posting. The Terms shall be governed by, and shall be construed in accordance with, the law of Singapore.

Disclaimers
The Website has not been reviewed by the MAS. Accordingly, the Website may not be accessed directly or indirectly to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, (ii) to a relevant person pursuant to Section 305(1), or any person pursuant to Section 305(2), and in accordance with the conditions specified in Section 305, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. 

Nothing in the Website constitutes tax, accounting, regulatory, legal or investment advice.  The Website is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation or for the purpose of soliciting any action in relation to Robeco’s businesses, or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer and solicitation. Any reproduction or distribution of information from the Website, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited.  By accessing to the Website, you agree to the foregoing.  

The funds referred to in the Website are for information only.  It is not a recommendation or investment advice, nor does it mean the funds is suitable for all investors.  The contents of the website is not reviewed by the MAS.  Any decision to participate in the funds should be made only after reviewing the sections regarding investment considerations, conflicts of interest, risk factors and the relevant Singapore selling restrictions.  You should consult your professional adviser if you are in doubt about the stringent restrictions applicable to the use of the Website, regulatory status of the funds, applicable regulatory protection, associated risks and suitability of the funds to your objectives.

Any decisions made based on the information contained in the Website are the sole responsibility of yours.  Any investments made or to be made shall be with your independent analyses based on your financial situation and objectives.  The investments and strategies contained in the Website may not be suitable for all investors and are not guaranteed by Robeco.  

Investment involves risks and may lose value.  Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future.  The value of your investments may fluctuate.  Past performance is no indication of current or future performance.  The Website may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies and such projection or forecast is not indicative of the future.  The information contained in the Website, including any data, projections and underlying assumptions are based upon certain assumptions, management forecasts and analysis of information available on an “as is” basis and without warranties of any kind, whether express or implied, and reflects prevailing conditions and Robeco’s views as of the date published or indicated, and maybe superseded by subsequent events or for other reasons.  The information contained in the Website are accordingly subject to change at any time without notice and Robeco are under no obligation to notify you of any of these changes.  Robeco expressly disclaims all liability for errors and omissions in the information presented in the Website and for the use or interpretation by others of information contained in the Website.

Robeco Singapore Private Limited holds a capital markets services licence for fund management issued by the MAS and is subject to certain clientele restrictions under such licence.  An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

I Disagree