5G is coming and it could be enough to lift the cloud that has descended on technology hardware stocks.
And what a cloud it is. Apple (AAPL) is cutting phone production; automotive markets are slowing; and industrial markets are decelerating, albeit from a healthy level. All in all, the economy is looking a little wonky.
5G refers to the fifth generation of wireless technology. This is literally the upgrade from 4G and 4G LTE communications infrastructure. Intel (INTC) says 5G will offer 10 times less latency, 50 times more speed and 1000 times more capacity.
The step up is a big deal for the communication service value chain. Kumar told Baron’s that five to 10 times the data will be going in and out of a 5G base station, while antennae are more complex, and connections everywhere will need upgrades. “5G spending will be orders of magnitude beyond the 4G cycle,” he said.
The early parts of the communication services value chain are already benefiting from the 5G transition. Capital and test equipment providers, at the leading edge of 5G deployment, have been talking about 5G trends for a while. Keysight Technologies (KEYS) told investors at a recent conference that its 5G business has grown double or triple digits for 11 straight quarters.National Instruments (NATI) called 5G a “major growth opportunity” on its most recent quarterly conference call. National Instruments helps its customers design 5G products.
They’re not the only ones. Chip makers Intel and Texas Instruments (TXN) reported double digit growth in their communications service business even as investors worried about the impact a data center-spending slowdown could have on semiconductor industry. And Cisco Systems (CSCO) added that its customers have started to engage in earnest at the 2018 Mobile World Congress.
Those are customers like AT&T (T) and Verizon Communications (VZ) that are at the forefront of 5G implementation. AT&T purchased Fiber-Tower Corporation in February to gain access to broadcast bandwidth that will accelerate its entry into 5G services. Verizon bought Straight Path Communications in 2017 for the same reason. Verizon has also begun installing 5G home service in four U.S. markets this year and is planning a broader rollout of the technology in 2019.
The 5G rollout doesn’t just impact America. China is the most aggressive adopter of 5G technology and will have multiple base stations in dense urban areas functioning by next year.
Things are moving ahead quickly. Global internet traffic is measured today in zeta-bytes. That’s a 1 with 21 zeros after it. Cisco predicts that internet traffic will grow more than 20% a year until at least 2021. That’s a lot of data and it is going to require 5G infrastructure.
In fact, 5G could usher in an era of unconstrained data transfer. If that’s the case, we might be entering a brave new world that makes science fiction a reality. – Barrons