Industry Voices — Baker: How the 5G smartphone cycle will differ from 4G

Industry Voices Simon Baker

The first LTE services for phones were launched close to 10 years ago at the end of 2010 and in early 2011.

A decade is a long time ago in terms of how fast the mobile industry develops. Though some contemporary events sound eerily familiar – in early 2011 the world was recovering from the swine flu pandemic, which had killed somewhere between 150,000 and 500,000-plus people.

Before the 4G smartphone cycle began, the first iPhone had only been launched in 2007. Nokia’s smartphone share was dropping fast but still substantial. A lot of the smartphone industry was based in Europe. The rise of the Chinese players was largely yet to come. Europe and the U.S. were individually nearly still as big of markets as Asia Pacific.

The smartphone market as a whole had started to expand quickly in 2009 and was growing fast as 4G got launched.

4G got going in the U.S. first, with Korea a leader too. Europe did not become significant for another year. The first LTE smartphones were from Samsung and HTC. The early phones had prices close to $800, a third or so higher than that for 3G smartphones at that point. But soon that price premium had ebbed away. It was to take until the second half of 2012 before the new fourth generation of mobile technology reached double figures in percentage share of the smartphone market.

5G compared to 4G

So far, there are lots of similarities between 5G and 4G. Korea has been by far the most important 5G player in the first half of 2019, and the U.S. has also been up there in the beginning, though not very prominent. Europe has really yet to get going. And in terms of the global market, 5G was only getting traction slowly across 2019. 

Another similarity is the key role of China. China proved to be the key driver for 4G, and it looks as if it is going to play that part again with 5G. Again, this will be after a short-time lag. China did not figure in the 4G stakes until the second half of 2012. Thereafter though its rise was meteoric; at its peak in the second quarter of 2015, almost one half of global 4G smartphone sales were in China. That figure then started to go down slowly and has now dropped to less than a quarter.

If 5G were to follow a similar path as 4G, and China shows the same momentum, over 200 million 5G smartphones could be expected to be sold there in 2021. Initial targets by the Chinese operators were in line with this – but that was before the coronavirus crisis, so the timetable will now be put back by margins currently very difficult to judge.

Smartphone brands

A key impact of 4G was the way it changed the brand landscape. When 4G took off in China it was a market with lots of smartphone brands. Apple was the early 4G leader, but it was supplanted quickly by Samsung and local brands including Huawei, Coolpad, Lenovo and OPPO.

Thereafter followed a wave of consolidation, first of all in China, but then spreading out around the world. Within China the 4G revolution in particular created the opportunity for the BBK company. It is behind two brands, OPPO and vivo, which grew fast, serving less-developed areas of China away from the richer coastal cities.

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More recently, BBK has spawned additional brands, notably OnePlus and realme, which are run fairly independently. These brands have since moved into export markets and along with the rise of Huawei and with Xiaomi have created the consolidation that is being felt across Android today. A lot of the local brands that had sprung up around the world, commonly known as “local kings” and often launched by local distributors, have been pushed out.

Smaller Android brands in global terms such as Sony, HTC and LG have also been under intense pressure. 

Major changes in the vendor landscape look less likely to take place this time round with 5G. One reason is that so much consolidation has already taken place. Again, what happens in China will be key. While Huawei’s problems ease the pressure for smaller rivals in lots of markets, Huawei is responding by increasing its share back home in China. The BBK stable, along with Xiaomi, is finding the going tough, leaving little room for any new entrants.

These Chinese players need to gain share in export markets, and 5G devices are the means by which they can be expected to make their push. They will need to price their new models keenly. So there is a link between competition in the Chinese market and how fast 5G prices will fall elsewhere.

In technology 5G will also favor the big companies with more R&D resources. While the need for more powerful batteries has been accommodated by the general trend toward larger screens, allowing a bigger body to the phone, the new electronics have created technical challenges, one of them being more heat, with some manufacturers developing liquid cooling systems within the phone. When mmWave comes, more common to 5G devices, the complexity will only increase.

In the longer term, there are reasons to believe the momentum of 5G may ebb more quickly than with 4G. LTE shipments made up virtually the whole smartphone market before 5G began to kick in last year. For many users, 4G is good enough, and the advantages of the new technology are nowhere near as clear as they were between 3G and 4G. In its early stages 5G will primarily be an urban phenomenon, serving high-density, high-usage markets. Many countries will be left years behind in 5G, leaving the potential for a longer tail for 4G than 3G has seen.

Meanwhile, the global smartphone market is no longer in its growth phase, and consumers are holding onto their phones for longer. The 4G cycle was a lucky one, a product with clear advantages at a time of industry growth. For 5G, currently stymied by the coronavirus crisis, the cycle could be quite a bit more difficult.

Simon Baker is program director for mobile phones and consumer devices at IDC EMEA and a coordinator of IDC global forecasting for the 5G smartphone market. He is a long-time analyst in the mobile phone arena. Please contact him at sbaker at idc dot com

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.