Soon, buying a 4G phone won't make sense except for the poor. Counterpoint Research is the first with data on where people are buying 5G phones, including in Korea. Many live in areas not yet serviced. Verizon 5G phone purchasers often live far from any 5G coverage, as you can see in the illustration from Counterpoint. Everyone in telecom is now rethinking 5G strategies.
In hindsight, it makes sense. Who wants to buy a phone likely to be obsolete soon? If you are buying a US$1200 phone, US$100-200 more is a reasonable price to pay for assurance you'll still be happy in two years. 70% to 80% of sales of Samsung's top-of-the-line Galaxy S10 are the 5G model. It has sold over a million units in 80 days, 12,500 per day.
My forecast is that sales of 5G phones will explode when prices come down. China Mobile predicts prices of US$150-300 in 2020, as does Huawei.
The extra cost for the parts needed for 5G phones is falling to between US$25 and US$50. Getting the price down will require some compromises, including few international frequency bands and a relatively slow processor. The phones should work fine for practical purposes.
I - and many others - have revised up our estimates. If I'm right about the effect of a price drop, that will lead to very heavy sales in 2020 and 2021. Some likely results:
- Once many people have 5G phones, they are likely to clamour for 5G service. Companies like Telecom Italia will probably discover going slow on 5G is a mistake. (TI plans 21% coverage for 2019.)
- Most people are going to be disappointed with 5G speeds, which have been hyped as a gigabit and more. Most 5G connections will be at 100-400Mbps, especially indoors. The average 5G connection in Korea is at less than 200Mbps.
- For now, many are undecided and often holding on to older phones. The iPhone 5G is 2020 and the 2019 sales may be disappointing.
US 5G Smartphone Sales Extend Cross-Country in the First Month of Sales
Verizon’s 5G smartphone sales are dispersed all over the US, showing that consumer demand goes beyond the cities with 5G coverage.
San Diego, Buenos Aires, London, New Delhi, Hong Kong, Beijing, Seoul
July 12, 2019
The US market shows 5G smartphone sales in over 10 cities in May despite Verizon only launching 5G services in Chicago and Minneapolis, according to the latest research from Counterpoint’s US Smartphone Sales by City Tracker. While Chicago did show the highest concentration of sales, it represented only 5% of total 5G smartphone sales according to data collected across millions of sales data points during May.
Speaking about the initial 5G expansion in the US, Tom Kang, Research Director at Counterpoint Research, said, “Verizon started the nation’s first 5G service and also the world’s first 5G service with millimeter wave. In April, the service was launched in just two cities, Chicago and Minneapolis. Verizon continues to add cities slowly. Denver joined on June 27th and Rhode Island on July 1st.”
Kang continued, “The top 10 cities make up just one-third of all 5G smartphone sales in May. This indicates how widespread initial 5G smartphone sales have been, despite early predictions that sales will concentrate in cities with 5G service. Consumers are buying 5G capable devices across the country despite not having a 5G network available in most cases. Minneapolis, one of the two launch cities is not even in the top 10 list. Instead, we see cities like Dallas, Houston, and Los Angeles in the top five cities list for 5G smartphone sales.”
Maurice Klaehne, Research Analyst, further commented, “In our newest US consumer survey, we see that many consumers are forward-looking when it comes to 5G smartphone purchases. Over 85% of consumers have some awareness of 5G and are planning their next smartphone purchase with 5G network capabilities in mind. In other words, consumers are futureproofing themselves with the purchase of a 5G device.”
Klaehne added, “In our 5G Korea report, we showcased how Korean consumers began purchasing 5G devices as they took advantage of aggressive promotion strategies and data plans that aligned with consumer needs despite the current network shortcomings. Korea now has all major carriers promoting 5G, and all major brands have a flagship 5G device.”
Counterpoint Research predicts that 5G smartphone sales will see a significant increase in the US once all carriers and smartphone brands are ready with their offerings. Our forecast for the US market for 5G smartphones is more than five million units in 2019.
Over 5 Million 5G Smartphones Will Be Sold In The US This Year
5G smartphone availability has been limited. More device launches and carrier competition in H2 2019 will drive sales.
San Diego, Buenos Aires, London, New Delhi, Hong Kong, Beijing, Seoul
July 3, 2019
Counterpoint Research estimates that US 5G smartphone sales will cross five million units in H2 2019 as carriers ramp up their 5G network and device portfolios. Global 5G smartphone sales will reach 22 million units in 2019, according to our estimates. Overall, the US will lead the market in terms of 5G smartphone sales, followed closely by China.
Speaking about US 5G smartphone sales, Jeff Fieldhack, Research Director at Counterpoint Research said, “Current sales of 5G smartphones are limited as there are only two devices available, the LG V50 and the Samsung S10 5G. The mmWave supporting Samsung S10 5G was exclusive to Verizon until the end of June, but all major carriers have launched it now. We believe that H2 2019 will see a sharp increase in 5G smartphone sales as carriers expand their coverage and even more 5G devices launch. Expansion in mmWave capable devices will be key for growth as consumers will be able to see the dramatic speed increases over LTE.”
Except for Apple, all major OEMs such as Samsung, LG, Motorola, ZTE, and OnePlus will sell 5G smartphones in H2 2019. This will increase 5G smartphone penetration drastically as compared to H1 2019. Fieldhack added, “We believe Apple will not have a 5G capable iPhone available till 2020. If Apple had launched a 5G device this year, we believe that the US market size for 5G would have been at least 60% higher than the current estimate. In 2020, there will be an even greater acceleration in 5G smartphone sales due to 5G iPhones becoming available.”
Research Analyst, Maurice Klaehne said, “Initially it was thought that there would be a high concentration of 5G smartphone sales in areas where there is 5G coverage. However, our research indicates that 5G smartphones are being bought all over the country. This trend will likely increase as consumers want to buy the newest devices, future-proofing their purchase for the next several years. Promotions and marketing for these devices will also likely ramp up in H2 2019.”
Klaehne continued, “We saw this trend initially in Korea where sales of 5G smartphones crossed 1 million in just 70 days. It all started when every carrier had a 5G smartphone in their portfolio, and an all-out marketing war ensued. Subsidies for 5G devices went from ~US$250 to ~US$500 in a month, creating a hyper-subsidy environment. Consumers often chose to purchase a 5G device over 4G alternatives because they got it at a lower price point with better specs. We believe a similar trend will develop in the US.”
Elaborating on global 5G roll-out, Tom Kang, Research Director, added, “We are cautious on our forecast, but we think 5G will eventually have a faster roll-out than 4G LTE. Looking back at LTE, the network was split between FDD-LTE and TD-LTE, which resulted in a slower roll-out over two years. Only the US and Korea deployed LTE in the first six months. Europe and China started one year later. Globally, the ramp up will be faster because there is now a universal standard for 5G. Operators in the US, China, Europe, and Korea will all be launching within the same 12-month period. It is an unprecedented network deployment. This will drive global sales to 22 million by the end of 2019.”
5G Rollout in Korea – The First Month
It has been a little over a month since the three major carriers in Korea – SK Telecom, KT and LGU+ – took the country into the 5G era by launching commercial services simultaneously. The three companies launched the world’s first 5G service at a launch event with celebrities including Korean pop-stars, famous sports players, gamers on April 5, 2019. Impressively, the commercial rollout of 5G has been achieved in a short span of time as it was only four months ago in December 2018 that the first successful 5G transmission took place in Korea.
The number of subscribers exceeded 100,000 within one week of service beginning, and after 25 days, 260,000 people have subscribed to 5G. The rapid increase in initial subscriber numbers compared to 4G LTE shows that users’ interest and expectations for 5G are huge.
Let’s take a look at what we have learned from the first month of 5G in Korea:
What has changed?
- Data transmission speed
5G enables three core use-cases – Enhanced Mobile Broadband (eMBB), Massive Machine Type Communication (mMTC), and Ultra-Reliable Low Latency (uRLLC). Of these, only eMBB is considered possible on the 5G NSA (non-standalone). The remaining two require 5G SA (standalone) commercialization. Therefore, the data transmission speed is the key to judge the quality of the 5G NSA.
Counterpoint Research used Samsung’s Galaxy S10 5G and measured the download speed using a mobile app. The highest speed was 682Mbps measured at Gimpo city, followed by 497Mbps near Gangnam subway station. Latency is about 20-40ms on average, which does not show a big difference from 4G LTE.https://www.counterpointresearch.com/wp-content/uploads/2019/05/5G-speed-300x275.png 300w" sizes="(max-width: 433px) 100vw, 433px" style="box-sizing: border-box; height: auto; float: none; margin-left: auto; margin-right: auto; width: auto; display: block;">
- Subscription tariff increased by about 12% compared to 4G LTE
Due to the characteristics of 5G and its use-case eMBB, users cannot experience proper 5G service with data consumption of less than 10GB per month. According to a recent announcement by the Ministry of Science and Technology, average LTE traffic reached 8.34GB per month just before 5G was commercialized. Since 5G is expected to increase data consumption at a fast pace, slim plans, which provide less than 10GB per month, are difficult for 5G use.
As such, if we look at the standard tariff plans for 5G from each carrier, on an average the rates are about 12% higher than that of 4G LTE. However, 5G plans offer more than 150GB of data per month. Of course, there are differences between carriers.
- 5G Contents
Preparation of related content is critical for the success of 5G as it is the most intuitive way for smartphone users to feel the need for upgrading from 4G LTE. As a result, carriers are operating a separate section on their website where users can experience 5G content. Examples of initial 5G content are ultra-high-definition media, VR/AR, and games.
What are the problems?
- Insufficient number of base stations, difficulty in access, and coverage limitations: Seoul and metropolitan areas have the highest concentration of 5G base stations, which limits coverage.
- 5G Quality issue: In many cases, there was no significant difference in speed compared to 4G LTE. Also, smartphones could not easily switch between 5G and 4G LTE. Further, battery consumption is about 1.5 to 2 times higher.
- Lack of content: Even in areas where 5G has good coverage, there is a lack of content to make good use of it.
How will it do in the future?
- Carriers: The plan is to focus on expanding coverage by the end of the year, by increasing the number of base stations while work on optimizing 5G devices and telecommunication equipment will continue. They are also trying to find suitable content that can take advantage of 5G.
- Government: It has announced a support policy for early stabilization of 5G which includes tax benefits for purchasing 5G telecommunication equipment and support for 5G network-based projects. The government has also promised an investment plan of more than KRW 30 trillion (roughly US$25 billion) by 2022 through a ‘5G+ Strategy’. It has also designated 10 core industries and five core services related to 5G and plans to support those.
- OEMs: Expectations are that OEMs will expand consumers’ range of purchases by launching more 5G Smartphones.
- The government, carriers, and OEMs formed a joint task force team (TFT) to discuss technical problems in April. It will regularly discuss and announce technical issues as well as remedies such as service coverage expansion and disconnection issues.
Korea 5G Smartphone Shipments Forecast
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In 2019, the first year of 5G, we expect 5G smartphone shipments to be around 1.7 million and account for 9% of the total handset shipments. We estimate the market to pick up the pace when Apple releases 5G iPhones next year. The decline in 5G smartphone price coupled with a drop in 5G component prices, expansion of product lineup, and securing related content will be important factors for market growth.
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