5G Progresses Despite Questions About Mobile Phone Supply

Connections will triple in 2021, shows new forecast

The worldwide transition to 5G networks continues apace. Our latest forecast, available to subscribers here, shows that 5G network connections worldwide remain on track to triple in 2021 to 637 million, and to more than double in 2022 to 1.34 billion. Our projection of 3.6 billion 5G connections worldwide by 2025 still stands.

But there’s a valid question about whether supply shortage can affect this progress in the short term. In another turbulent year for the mobile phone market, supply constraints in low- to mid-tier segments, paired with weak demand in emerging markets, have dampened sales. However, smartphones with 5G capability, which have been limited to the premium and high end of the market and are now starting to slip toward the mid-tier, have largely remained sheltered from component shortages.

Our latest mobile phone forecast expects just over 560 million 5G-capable smartphones to sell in 2021 (see highlights here; subscribers can access it here). But that number is reliant on almost 200 million units forecast to ship in the current fourth quarter of the year. Rumours suggesting the supply of high-end devices, including the iPhone, will be tight during the Christmas quarter have intensified in the past two weeks. If this is true, adoption of 5G might slow down temporarily, but will pick back up again in the following two to three quarters.

But importantly, telecom operators in Western Europe, North America, China and other advanced markets in Asia continue to roll out 5G networks, overcoming difficulties posed by the Covid-19 pandemic, uncertainties about the role of Chinese network equipment-maker Huawei, and an unstable macroeconomic environment. In South Korea, 5G is on track to account for 30% of mobile connections by the end of 2021. Strong mobile phone sales in the run-up to Christmas will help the US achieve 25% penetration, surpassing the Chinese market. Although China was an early trailblazer for 5G, shaky demand for smartphones in 2021 means that 5G is forecast to account for only 24% of cellular device connections by the end of the year.

In contrast, Western Europe still lags some other markets, limited by delayed spectrum auctions in some countries, slow government decision-making about the role of Huawei, and weakened demand for mobile phones amid the pandemic. Although networks are rolling out faster, this relatively gradual start means that 5G won’t make up more than half of cellular device connections in the region until 2024.

Once the spectrum is allocated and telecom operators start deploying 5G networks, how quickly people adopt 5G depends on their willingness to buy 5G-capable devices. At the moment, we’re optimistic about this, as the global mobile phone market is set to recover in 2022 and prices of 5G handsets continue to fall steadily.

In addition to mobile phones and related devices such as tablets, there are two other drivers for 5G adoption: industrial cellular Internet of things devices and fixed wireless access. Both have strong prospects, despite being projected to contribute only 9% of worldwide 5G connections in 2025. Adoption of 5G in industrial applications is seeing positive momentum in China and is set to get a boost in the US when carriers start switching off their 3G networks.

Fixed wireless access remains a niche technology for now, mostly complementing fibre broadband. But some network operators are increasingly turning their attention to this opportunity with business users, recognizing that the potential revenue per connection could be significantly higher than that from connecting households.

A summary of CCS Insight’s new forecast for 5G connections is presented in the chart below.