The 5th generation of cellular network technology (5G) will enable consumers to download data at significant speeds, with shorter delays, and buffering times. 5G uses high-frequency millimeter waves, allowing for faster access from a connected device to a wireless network. Millimeter Waves have short wavelengths that range from 10 mm to 1 mm. These small wavelengths make it easier for large bandwidth communication and for higher data transfer rates. In addition, Millimeter Waves can transmit data at or often over 10 gigabytes per second.

5G download speeds will be a stark contrast for those in the early-2000’s who downloaded music from services such as, LimeWire or Napster and patiently waited, as it often took quite long to even download a single song or media file.

Over time, each new generation of cellular technology has improved in terms of both, download speeds and connectivity.

Wireless Communication Timeline:

• 1G (1981): An analog cellular system that launched commercially on October 13^th, 1983.
• 2G (1992): Introduction of digital technologies that used spectrum more efficiently so that it could serve more people and deliver more applications, such as text messages.
• 3G (2001): Improved communications by supporting even more diverse applications, including mobile internet access, mobile gaming, video calls and streaming audio and video.
• 4G (2010): Delivered even faster speeds and further improved experiences for consumers that used data-intensive applications.
• 5G (2020): Is expected to support diverse applications and more connections; providing more capacity, lower latency, and increased speed. 5G will handle the exponential growth in demand for capacity, connectivity and capability. (1)

The Internet of Things (IoT)

One concept that will accelerate under 5G is IoT or the Internet of Things, which is the extension of Internet connectivity into physical devices and allow consumers to interface with almost any device.

5G is not only going to change how consumers interface with their phones but how consumers interface with almost all of their wireless devices. It is believed that IoT is going to connect 75 billion devices by 2025 (2). To put that into perspective, there is around 26 billion connected devices today.

When will 5G impact our lives?

Carriers such as Verizon and AT&T currently have 5G capabilities in cities such as Atlanta, Chicago, Minneapolis and Indianapolis (to name a few). Although the major carriers are expected to begin rolling out 5G everywhere in 2020, many experts believe that the material impact 5G has on society will be years later. Specifically, in an article for the World Economic Forum, Don Rosenburg (an Executive VP at Qualcomm) cited a report by economists who believe that 5G technology will produce $12 trillion of new goods and services by 2035. (3)

Companies to watch:

• Qualcomm (Nasdaq: QCOM) is producing a variety of semi-conductors to handle 5G capabilities for phone providers like Samsung and Xiaomi. Qualcomm is also actively pushing to establish 5G standards along with technology innovation in spectrum licensing and chipset design for both mobile and IoT.
• Nokia (NYSE: NOK) has 42 commercial 5G deals with companies such as T-Mobile and SoftBank making them the most involved company in the industry in terms of the number of contracts. These deals, plus the additional ones they will sign in the upcoming future are likely to exceed the revenue estimates many analysts have made for Nokia.
• Cisco Systems, Inc (Nasdaq: CSCO) announced that they intend to buy Acacia Communications for $2.6 billion. Acacia develops, manufactures and sells high-speed coherent optical interconnect products that are designed to transform networks linking data centers, cloud and service providers. They believe that Acacia’s technology will reduce costs and complexity of digital signal processing.
• Skyworks Solutions, Inc (Nasdaq: SWKS) has positioned themselves as a leader in the chipmaker space, the company offers a portfolio of products that address the innovative requirements for 5G infrastructure including small cell amplifiers, circulators, high-performance low-noise amplifiers (LNAs) and high-isolation switches.
• American Tower Corporation (NYSE: AMT), owns thousands of cell towers around the world, and it makes money by leasing out these towers to mobile carriers. As 5G begins its rollout, rental income for the cell towers is likely to rise.
• Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) has largely been known as a main chipmaker for smartphones. The company stated in their last earnings call that they believe, faster development of 5G technology should lift demand for chips used in smartphones, base stations, autonomous vehicles and Internet of Things. Since they are known for their chips for smartphones, new 5G smartphones could subsequently benefit the company.
• Equinix, Inc. (Nasdaq: EQIX) specializes in internet connection and data centers. The company leads in global colocation data center market share, with 200 data centers in 24 countries on five continents. By leveraging a vendor-neutral colocation and interconnection platform, both mobile users and mobile carriers will be able to access rich network and cloud ecosystems that support 5G networking.
• Huawei Technologies Co., Ltd is the world’s 2^nd largest smartphone manufacturer is already producing 5G devices and has spent more than $600M on 5G projects since 2013 and plans to help rollout 5G to other emerging market countries in Africa and Latin America.

5G is likely to revolutionize how consumers interact with all their wireless devices. This nascent technology could progress interconnectivity by providing new ways to communicate and connect with the world around us.

ABOUT THE AUTHORS

Aaron Yanku is a Senior Associate of Wilshire Phoenix Funds. Before joining Wilshire Phoenix Funds, Aaron worked at Maxim Group, a New York based Investment Bank where he specialized in private and public equity placements and offerings. Aaron is a graduate from Temple University and holds the Series 7 and 63 licenses. Esmiralda Dodaj is an Associate of Wilshire Phoenix Fund and is a recent graduate of St. John’s University with a Bachelor of Science in Finance.

Sources:

1. https://www.reit.com/news/reit-magazine/november-december-2018/reits-ready-5g
2. https://www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/
3. https://www.weforum.org/agenda/2018/01/the-world-is-about-to-become-even-more-interconnected-here-s-how/