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The Best Way To Play The 5G Revolution

5G Revolution

What exactly is 5G Technology? Depends on whom you ask. The next generation of wireless technology means different things to different people.

To the wireless industry, 5G is a gilt-edged chance to promote a new technology that might open up new revenue streams.

To 5G-licensed satellite companies, it’s a grand opportunity to sell something they have paid nothing for at a windfall profit.

To President Trump, 5G is a convenient political talking point to stir up nationalistic furor over a race with China and the rest of the world.

It, therefore, comes as little surprise that Trump is not even content with 5G but wants 6G as well to make sure America shows a clean pair of heels to its rivals. On Thursday, the president sent out a hilarious tweet urging wireless companies to deploy 5G and 6G networks ASAP, apparently oblivious to the fact that 6G tech has not even been properly conceptualized.

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In another tweet, Trump rhapsodized: " 5G and 6G are so obviously the future."

Beyond the hype

You can hardly fault the president for being a little paranoid and sounding a rallying call to wireless companies to roll out their 5G networks as a matter of urgency. A study done last year by global consulting firm Deloitte showed that China is miles ahead of everybody else in the 5G race and the gap is widening. At current rollout rates, it could be years, if not decades, before the US catches up to China hence the president’s admonition.

Trump’s concerns aside, there’s no shortage of hype surrounding 5G making it tough to separate the facts from marketing bluster. So, what exactly is 5G technology? In a nutshell, 5G is short for 5th generation cellular network system which is essentially the latest generation of cellular wireless communications technology that succeeds 4G, 3G, and 2G systems. The technology features superior performance on metrics such as higher data rate, lower latency, massive device connectivity, higher system capacity, and lower costs.

But perhaps that strongest selling point of the new technology is that it won’t merely be an upgrade on existing 4G/LTE systems but will, in fact, be orders of magnitude better. Indeed true 5G will be capable of 100x faster download speeds than 4G and a latency of 1 millisecond vs. 50 milliseconds by LTE. So in terms of performance, it’s going to be a big step-up to anything available right now. Perhaps you have heard terms like ‘10G’ thrown around especially by cable companies hence the natural assumption that it must be preceded by 6G, 7G and so on. Well, the 10G that the likes of cable lobby group NCTA frequently pontificate about is not a new standard like 5G but rather is merely marketing shorthand for 10Gbps speeds that future 5G networks will be capable of delivering.

Going by that definition, it becomes abundantly clear that what carriers like AT&T are touting as 5G is quite far from the real deal. Smartphone users in areas where AT&T has deployed advanced 4G LTE networks usually see a "5G E" network indicator on their devices. 5G E stands for 5G Evolution but is, in essence, nothing more than 4G with advanced LTE features such as three-way carrier aggregation, 256 QAM and 4x4 MIMO.

Even Verizon Wireless5G Home service is not truly 5G. Although VZ scored an important PR victory over bitter rivals such as AT&T and T-Mobile after beating them to the 5G launch pad, what the company launched in the fall of 2018 is a pre-standard 5G network that still has to wait for ratification by standards bodies.

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Best Stocks to Play the 5G Boom

In short, the real 5G will be capable of feats that will put to shame anything available in the market today. Nevertheless, investors will be more interested in the opportunities it will open up.

The commercialization of 5G tech is slated to get truly underway in the current year. 5G is expected to be a truly revolutionary mobile paradigm that will power the next wave of technological disruption including autonomous vehicles, smart factories (IIoT), virtual and augmented realities, edge computing and healthcare-specific IoT to mention a few. Moor Insight & Strategy estimates that global infrastructural spending on 5G will top $326 billion by 2025. Related: Critics Call For Apple, Google To Remove Controversial App

This spending will initially focus on network transformation, 5G network protocols, data centers and edge computing (real-time, high-performance data processing without needing the cloud). Here are some companies set to reap the benefits of the 5G breakout:

#1. Datacenter OEMs (including edge computing)

Moor Insights estimates that nearly 80 percent of 5G infrastructure spend will come from hardware and network transformation project. Key players here include:

  • Cisco Systems Inc.
  • IBM
  • Hewlett Packard Enterprise
  • Lenovo

#2. Datacenter component suppliers (including edge computing)

These companies supply components that other companies use to build their hardware solutions. Leading players are:

  • Intel
  • Broadcom
  • Skyworks Solutions
  • AMD
  • Nvidia
  • Samsung
  • Xilinc Inc.
  • Qorvo
  • Qualcomm Inc.

#3. Network transformation providers

These companies help telecoms and other communication services providers to upgrade their networks to handle 5G. Key players are:

  • Nokia
  • Ericsson
  • Intel
  • Samsung
  • Huawei

#4. Modem and IP suppliers

This group of companies builds modems and/or supplies intellectual property that contributes to 5G standard. These companies are likely to be some of the biggest beneficiaries of the 5G transition. Key players to watch here include:

  • Ericsson
  • Huawei
  • Intel Qualcomm
  • Nokia
  • Samsung

#5. Mobile telecom companies

The faster and more efficient data flows, the more services telecom companies are able to sell to customers. Further, the mere launch of 5G networks is ample catalyst to a carrier’s stock as VZ stock demonstrated last year. Nevertheless, carriers do n’t stand to gain as much as the other categories here due to competition and commoditization pushing data prices down.

Companies to watch include:

  • Verizon
  • AT&T
  • China Mobile
  • T-Mobile
  • Sprint
  • SingTel
  • Vodafone
  • Orange

Companies like Intel and Qualcomm that skirt several categories are likely to be bigger winners. Qualcomm has built a reputation for manufacturing some of the finest modems in the business while Intel supplies the most complete end-to-end solutions. Nevertheless, both companies are plagued by other issues, and only investors with a long-term (3-5 years out) outlook should buy the shares.

For investors with a shorter outlook, Xilinx stock is already enjoying the benefits of a 5G-driven sales revival.

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Source: CNN Money

By Alex Kimani for Safehaven.com

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