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The 5G Smartphone Hype Cycle is Revving Up But will Soon Hit Potholes

by Ken Hyers | Oct 18, 2018

5G smartphones are coming soon and the industry is revving up the hype about faster speeds and lower latency with the new devices. Soon consumers will be asked to shell out hard earned dollars (or Yen, Yuan, Won, etc.) for these next generation devices. The reality is that the first 5G devices will be larger and more power-hungry than current smartphones, offer minimal performance gains for most applications, and the use-cases for smartphone-based 5G services are still fairly nebulous (faster video downloads?).

5G phone

This isn't to say that 5G is not worth it for consumers - clearly it will be. But as with previous cellular generations, there will be teething issues during the transition period. 5G smartphones will get noticeably better, adding new features such as faster processors, better AI and foldable displays. Services and applications will appear that will take advantage of faster speeds and lower latency.

But a big stumbling block for 5G phones will remain: price. The first 5G smartphones will have wholesale ASPs north of $750, which translates to close to $1,000 at the store - and the very best 5G smartphones, offering premium features, will cost much more. In a market environment where phone replacement cycles are lengthening due to higher prices and a perceived slowing of innovation, it will be a tough sell to get consumers to pay more for a phone that offers fewer obvious benefits for customers.

The price of 5G smartphones will decline as the technology evolves and economies of scale kick in as 5G phone sales volumes take off. But in key 5G economies like China the ASP of a 5G phone will remain well above what it is for other smartphones for years to come. To kick-start 5G smartphone sales carriers will be forced to employ subsidies in order to bring customers onto their 5G networks. Phone vendors will be pressured to meet price points for their 5G devices that will leave them with razor-thin margins.

By 2025 half of all smartphones sold will be 5G. But in the near term there will be challenges for device makers as they navigate the transition to 5G. In every previous generation change at least one major phone maker has stumbled badly, and this generation will be no different.

In a series of reports from Strategy Analytics' Device Technology practice we lay out how the 5G phone landscape will evolve. Clients can access the following reports here:

5G's Dirty Little Secret: Subsidies Must Return

Global 5G Handset Forecast : 2015 - 2023

Global 5G Smartphone Wholesale ASP & Revenue Forecast: 2018 to 2025




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