For consumer 5G to come together quickly, a number or preconditions have to be met. The market needs smartphones at a suitable price, and it needs a lot of well-heeled consumers. And mobile operators must be ready and able to invest heavily in the infrastructure.
Only South Korea met those conditions in full in 2019. But it had the advantages of being small and with a high population density and a government keen to see it all happen.
Korean 5G kicked off in April 2019, and of the 4.5 million 5G smartphones sold in the second and third quarters, according to IDC’s Worldwide Quarterly Mobile Phone Tracker, nearly three quarters were sold in Korea. Samsung took four-fifths the market there and LG the rest. Both achieved average retail sales prices for their 5G smartphones before tax of over $900.
The US only managed a sixth of Korea’s volumes, with Samsung repeating its 80% market share, with an ever higher average sales price of nearly $1,300.
With such a strong performance by the brand in these markets but no large-scale sales beyond them, it is no surprise that Samsung has chosen to keep the premium moniker around 5G in its launch of the new Galaxy S20 range earlier in February. The basic S20 costs more than a thousand dollars, and the two models up, yet more expensive, feature 5G mm wave, which adds more component cost to the phone.
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The 5G focus on Korea and limited sales in other “leader” markets where pricey smartphones do well, was phase one of the 5G rollout story.
The second phase got underway in the fourth quarter and was a switch away to China and focus on its phone players. China’s 5G rollout began to get going in the fourth quarter, with Huawei selling 6.8 million 5G smartphones and achieving a market share not far short of that of Samsung on its home turf in Korea. Vivo, OPPO and Xiaomi also had sales in the hundred thousands. China’s sheer size changed the geographic picture markedly, with it accounting for 77% of the global market in the three months and easily pushing South Korea down to second place in the full year rankings (see table).
Less than 1% of Huawei’s 5G sales were outside China, showing the degree to which its 5G push depends on success at home and how the second phase of 5G development is essentially separate from the first.
The Chinese brands will not be worrying much about mmWave, and they will be trying to bring the price down fast – China has much lower average smartphone prices than South Korea or the US, and a mass Android market is unlikely to evolve until prices drop below $450 – half the current 5G average price in Korea.
The Chinese mobile operators were in January talking up the speed with which they intended to roll out 5G this year. China Mobile, the biggest operator, set a target of 100 million 5G phones for this year.
This was the plan, and it should have been the backdrop for Mobile World Congress, which was due to open in Barcelona on February 24. With the show’s cancellation, the 5G smartphone launches planned around it will now have to be rescheduled.
More fundamentally, the coronavirus crisis which lies behind the cancellation is causing mass disruption to the production of smartphones within China. At the time of writing in mid-February the situation around that disruption was very fluid. But my colleagues in IDC China are expecting production to be cut by as much as 50% per month into the second quarter. This will slow down phase two, with Chinese domestic smartphone demand in general expected to be way lower than usual in the first half of the year, delaying 5G.
The disruption in China could also slow down phase three, which will be the arrival of Apple. Apple was not at the forefront of 5G, just as it was not the first into 4G. Apple has already acknowledged it faces a production slowdown in China.
As regards its 5G launch, Apple is as always playing its cards close to its chest. But it appears likely that at least part of the new model range to be launched in Q3 will be 5G, and quite possibly all of it. That will have a major impact on the 5G market; the new iPhone models in 2019 accounted for more than a third of Apple’s 190 million iPhone sales for the year.
If all the new range is 5G, iPhones could then account for around a third of the global 5G smartphone market in 2020.
The arrival of Apple, when it comes, will make 5G much more of a global phenomenon. Apple has a large proportion of the premium smartphone segment in most of the richer countries around the world. It will obviously have a major impact in the US, where iPhones command over 70% of the smartphone market above $800 retail before tax, but also in Western Europe and Japan.
Then should come phase four, the widespread take-up of 5G phones in markets with more middling smartphone prices. This is where 5G ought to hit an inflection point and growth accelerate.
Phase four will probably see the sales of 5G models by the new-wave Chinese Android manufacturers Xiaomi, OPPO and vivo, jump significantly outside China. Those of Huawei will jump too, albeit more in countries where consumers are less concerned by whether those phones incorporate Android commercial services. As those sales grow, Samsung can be expected to start bringing 5G connectivity much lower down its product range to compete.
The chip players have already indicated they are moving to make 5G much more affordable, so once volume production ramps up, 5G devices should come down the price curve rapidly. The manufacturers have already shown they can make 5G devices that are not very cumbersome or heavy.
What has not become clear so far though is a captivating rationale for consumers in 5G. The reason to need it is still pretty elusive. Nice to have, but not need to have. That will change over time with more network rollout, but phase four, where the inflection point is reached and when 5G compatibility becomes something consumers expect to see on any mid-line phone, will be linked to 5G’s ordinariness, a phone feature which does not come with any appreciable extra price tag or disadvantage.