Industries Wtries Will Lill Lead T 5G R5G Reevvolution olution ead Thehe - October 2020 - Fitch Solutions
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October 2020
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ReevolutionIndustries Will Lead The 5G Revolution | October 2020
Contents
Telecoms........................................................................................................................................................................................... 4
5G Still At The Evolution Stage................................................................................................................................................................................................ 4
Asia 5G: Cautious Stance To 5G Will Boost Long-Term Growth Prospects ............................................................................................................ 7
Europe 5G: Downside Risks Weigh On Timely Launch And Wider Uptake .........................................................................................................10
Latin America 5G: Operators Opt For Cautious Approach As Returns On Investment Remain Uncertain ............................................13
MENA 5G: Strong Differences Persist Across The Region ..........................................................................................................................................15
North America 5G: Adoption To Accelerate After Short-Term Hiccups ...............................................................................................................17
Sub-Saharan Africa 5G: Deployment Costs, Price Sensitivity To Weigh On Investment................................................................................20
Industries .......................................................................................................................................................................................23
Healthcare And Autos To Be Main Early Adopters Of 5G ............................................................................................................................................23
5G Will Underpin The Healthcare Revolution .................................................................................................................................................................26
Smart Manufacturing The Early 5G Opportunity For Autos ......................................................................................................................................29
Level 5 Adoption Key 5G Driver For Autonomous Vehicles.......................................................................................................................................32
Power Sector Well-Poised For 5G Developments..........................................................................................................................................................36
Widespread Use Of 5G Will Take Time For The Oil & Gas Industry ..........................................................................................................................40
Minetech: Advantages And Pace Of Adoption Of 5G In Mining ...............................................................................................................................44
AgTech: Focus On 5G Premature .........................................................................................................................................................................................48
Infratech: 5G Not Yet Necessary For The Construction Sector................................................................................................................................51
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THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 3Industries Will Lead The 5G Revolution | October 2020
Telecoms
5G Still At The Evolution Stage
Key View
• We maintain our view that 5G will be an evolution first, then a revolution, and that the enterprise segment will be the
technology's main user.
• A change of methodology has meant our numbers are bearish in the second edition, but Covid-19 also had a short-term impact,
with operators focusing on costs and spectrum auctions being delayed.
• Geopolitics, standards and technical improvements will continue to change the structure of the 5G market.
As in our previous edition from April 2019, we maintain our view that 5G will be an evolution first, then a revolution, and
that the enterprise will be the technology’s main user. 53 countries have launched the technology so far, and many
emerging markets will not see 5G services after 2025, with 4G continuing to play a major role this decade.
We expect 4.351bn 5G subscribers in 2029, representing 45.8% of the market. This is more bearish than in the previous
edition, where we expected a 45% share and over 4bn subscribers a year earlier. While this is mainly due to a change of
methodology, as we have introduced a more granular method for the second edition, Covid-19 has also had an impact. Operators
are more focused on costs, making 5G less of a short-term priority, while many spectrum auctions have been delayed, meaning that
commercial networks will be launched later than expected. The pandemic has also hit device availability, with Apple only launching
a 5G iPhone in October 2020, which impacted 5G uptake in North America and Europe, where it is the main smartphone (as
opposed to South Korea or China).
At The Evolution Stage
Global 5G Subscriptions & Share (2020-2029)
f = forecast. Source: Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 4Industries Will Lead The 5G Revolution | October 2020 Spectrum will continue to be a key resource for the deployment of 5G services and operators will need a combination of low, mid and high spectrum: • Low-band spectrum, below 1GHz, is required for coverage, but does not offer high capacity and speed. • High-band spectrum, above 24GHz and also known as millimetre wave, offers very high speed but limited coverage, requiring more infrastructure. • Mid-band spectrum, around the 3.5GHz range, offers a good balance between coverage and capacity. 5G will have three main use cases: • Enhanced mobile broadband will allow consumers faster streaming through their smartphones. • Fixed wireless will be a major use case in markets where there are low levels of competition and investments in the fixed broadband market. • IoT will be the main use case and major game-changer, but in the longer term, with the enterprise segment as the main client. One of the first enablers of greater industry use will be new standards. Many 5G networks commercially available are known as non-stand-alone (NSA), which means they still rely, and are built on top, legacy 4G networks. The move towards stand- alone 5G networks, completely independent from 4G networks, while more expensive to roll out than NSA networks at the onset, will provide a range of new capabilities, starting from higher speeds and lower latency, driving new industry applications. New releases will also be a driver of new industrial applications, as 5G aims to replace Ethernet, Wi-Fi or 4G. Early 5G networks were built on release 15, which enables its main characteristics enhanced mobile broadband. Release 16, completed in July 2020, adds two others, which are ultra-reliable low-latency communication and massive machine-type communications. The combination allows for new types of use cases, such as vehicle-to-everything communications. Release 17, which is now expected to be completed in 2022, will focus on expanding these new capabilities while adding others such as expanded reality, whereas release 18 will focus on new verticals, use cases, deployments and spectrum. Open RAN is another key development. It is essentially the disaggregation of the hardware and the software within a 5G network, through open-source elements and virtualisation. As well the need for new applications, we believe there are two other key drivers towards open RAN: • The first is competition, where telecoms operators want to broaden their supply chain from the three main vendors. Open RAN enables this, with new players such as Altiostar, Mavenir and Parallel Wireless coming in, and the traditional vendors looking to offer the same service, with Nokia the main backer of the Big Three. • The second is geopolitics, as there are worries about the importance of Huawei in the sector. The US has backed many trade associations in terms of developing the right standards for open RAN, with the ultimate aim of becoming less reliant on the Chinese vendor by bringing new competition outside of Ericsson and Nokia. Lower costs, new capabilities through virtualisation and greater ease to swap equipment are the key advantages open RAN should offer to telecoms operators, but there are some potential drawbacks, including the need to integrate different vendors, as well as issues regarding performance, reliability and flexibility. The greater convergence of connectivity and cloud will lead to the rise of webscalers or hyperscalers. Microsoft provides an example of that trend through its recent acquisitions of Affirmed Networks and Metaswitch Networks and through the partnership between Azure and AT&T to integrate the former's cloud services on the latter's network edge. The emergence of edge computing, coupled by greater virtualisation and the adoption of 5G services, brings together many different stakeholders within the equipment, telecoms and cloud spheres. Partnership rather than competition is prevalent at the time being, as the edge remains a very nascent market. This will drive innovation, but as new capabilities are added, especially in terms of analytics and artificial intelligence, it becomes apparent where the value lies, and greater competition and tension should be expected between THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research. fitchsolutions.com 5
Industries Will Lead The 5G Revolution | October 2020 telecoms vendors, operators and cloud providers. 5G is at the forefront of technology becoming geopolitical. Huawei has continued to be targeted by the US, with latest sanctions preventing the company from purchasing key equipment such as semiconductors. Several countries have banned the vendor, either officially or not. The UK reversed its decision, giving operators until 2027 to remove all equipment. France, while not having banned the company, said that only Huawei would need authorisations, and those would only last until 2028, and only for operators currently using Huawei equipment; Free had tried to add Huawei as a vendor but was not allowed. The timing highlights not only the time it would take to replace all Huawei equipment, but also its costs. Even if countries do not officially ban it, Huawei is still under pressure as operators look to future-proof their networks, looking to use alternative vendors in case Huawei faces restrictions at a future date. THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research. fitchsolutions.com 6
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