The first phase of 5G technology is here—in a big way, and accompanied by phones that run on the network.
On April 11, Verizon began rolling out its actual 5G wireless network in Minneapolis and Chicago, with its 5G-Moto Z3 phone. Deloitte expects some 20 handset vendors to launch 5G-ready handsets in 2019, and about 1 million 5G handsets (out of a projected 1.5 billion smartphone handsets sold in 2019) to be shipped by year’s end.
AT&T is planning to bring 5G technology to Vegas, Los Angeles, Nashville, Orlando, San Diego, San Francisco, San Jose, Chicago and Minneapolis this year. And T-Mobile has announced it will launch 5G in 2019 with nationwide coverage next year.
Qualcomm (QCOM) reports that 20 global operators will roll out 5G this year, including all major U.S. carriers. And so far, 20 device manufacturers say they are going to use Qualcomm‘s 5G components in their devices. A report by Deloitte says that last year 72 operators tested 5G technology; by the end of this year they expect 25 to launch 5G, with another 26 by 2020.
Why is 5G Technology Such a Big Deal?
There are a lot of technical definitions for 5G, but one of our contributors to my Wall Street’s Best Investments newsletters, defines it very clearly. Jason Stutman, editor of Technology & Opportunity, explains it this way:
“The ‘G’ in ‘5G’ means it’s a generation of wireless technology. It signifies the next major upgrade to wireless network standards. And it’s designed to enable a faster, more robust network of connected devices.
“4G is what most of us use today. It has a theoretical download speed of 100 megabits per second (Mbps.), which is pretty fast. But 5G will be able to handle 10,000 Mbps., which is 100 times faster than 4G on its best day. There are several catalysts driving the launch of 5G technology:
“Catalyst No. 1: The Internet of Things (IoT)
“IoT is a broad way to describe the concept of an interconnected network that includes machines, wearables, buildings, automobiles, and tons of other types of devices. Cisco (CSCO) estimates that by 2020, within just the next two years, the number of connected devices will reach upward of 50 billion. And in four years, that figure is estimated to reach 1 trillion. This optimized network will be able to handle about 1,000 times more mobile data than today’s cellular systems can.
“Catalyst No. 2: Driverless Cars
“Google’s driverless car gathers nearly 1 gigabyte (GB.) of sensor data per second. That’s roughly 100 times faster than your computer can download a file. Intel (INTC) says the average autonomous vehicle uses 4,000 GB. of data over the course of a full day. 4G networking simply can’t keep up with that kind of demand, but 5G can.
“Catalyst No. 3: Augmented and Virtual Reality
“Only widespread adoption of 5G will make AR and VR fully possible, for several reasons:
“Latency (the amount of delay that occurs when transmitting data). The latency with 4G is around 50 milliseconds, which isn’t bad. But with 5G, that figure will drop to under 1 millisecond—about a 5,000% improvement.
“Connection improvement. According to telecom firm Huawei: ‘A 5G network provides up to a million connections per square kilometer. This will bring an exponential increase in the number of connections.’ That’s compared to the 1,000 connections that 4G can handle.
“Traffic. According to Cisco, traffic for AR is set to grow by 700% over the next three years. And traffic for VR is projected to increase by 1,100%. For AR and VR to function optimally, speeds of 25 Mbps. are needed. And right now, according to Akamai’s State of the Internet Report, the average connection speed—across the globe—is a mere 5.6 Mbps. And according to Qualcomm (QCOM), this will produce a 100-times improvement in overall traffic capacity.
“Bandwidth. Put simply, the wider the band, the faster you’ll be able to go. With AR and VR, the screens and equipment used will need bandwidth that 4G simply doesn’t offer. In the past, we’ve made do with bands below 6 gigahertz (GHz.). 5G will offer bands of up to 300 GHz—a 50-times improvement.”
So, I think you can see why 5G is such a big deal, hmm?
No doubt, the advent of 5G technology will eventually affect pretty much every company, no matter the industry. But telecom gurus predict just a few will see immediate benefits, including:
Manufacturing will benefit from 5G’s higher bandwidth and lower latency, leading to ‘smart’ and safer factories, depending on more automation and IoT connections to improve speed of production, as well as data mining. At the 2018 Mobile World Congress Americas, Nokia and Verizon demonstrated the difference in productivity between an automated guided vehicle (AGV) controlled via Wi-Fi and an AGV guided by 5G. When faced with an obstruction, the 5G AGV reacted very quickly, while the Wi-Fi-connected vehicle stalled, which would put a wrench in the operation.
If you get frustrated with buffering when you’re streaming, 5G promises to vastly improve that due to its faster capabilities. And with its lower cost per gigabyte, streaming should become more cost efficient.
- Health Care
You’ll see more telemedicine in analysis and diagnostics, as well as wearable technologies geared toward health applications, video conferencing to connect primary care physicians, specialists and patients in different places. Imagine how convenient this will be for patients in rural areas that typically drive two or more hours to get to a specialist. Market Research Future forecasts that the global telemedicine market will increase at a compound annual growth rate of 16.5% from 2017 to 2023—more than double the current size of the market.
Have you ever wished you could tell that driver in front of you to just move over? Well, that day is coming. With 5G technology, vehicles will be able to communicate with each other; sensors will not only tell you that you are drifting in your lane, but will give you information on the other cars in your immediate driving range, and send you traffic and safety alerts, and could even tell you where the closest parking spot is located. In the commercial arena, the faster data collection will help companies schedule freight better and save on fuel.
Three 5G Technology Stocks
The 5G investment opportunities will be immense, with scads of cutting edge companies debuting new products, and eventually, being gobbled up by their larger competition, but those days are still in front of us. For now, I believe investing in the larger companies is the way to begin our 5G investing.
I’ve surfed through a lot of stocks, and these three seem to have tremendous potential in the 5G arena—and all three have been recently recommended in my investment newsletters.
Our contributor, John Buckingham, editor of The Prudent Speculator, recommended Corning Incorporated (GLW), saying:
“Corning Incorporated is the leading designer/manufacturer of glass and ceramic substrates found in liquid crystal displays, fiber-optic cables, automobiles and laboratory products.
“GLW reported Q3 EPS of $0.51 (vs. $0.48 est.) and had sales of $3.05 billion (vs. $2.99 billion est.). The company benefitted from strong growth (19% y/y or better) in the Optical, Environmental and Specialty Materials segments.
“Corning increased 2018 revenue guidance to more than $13 billion with a gross margin of 42%. Corning remains focused on its ‘Strategy and Capital Allocation’ framework, which targets $26 billion to $30 billion in cash generation through 2019 and the return of more than $12.5 billion to investors.”
The stock recently saw a boost, after the company reported better-than-expected growth in its optical fiber wiring unit owing to the build-out of 5G wireless networks.
Keysight Technologies, Inc. (KEYS) was recently picked by Dan Sullivan, editor of The Chartist, after his system flashed a buy signal. Keysight, in collaboration with Qualcomm, recently announced that its “5G Conformance Toolset is the first test solution to be approved for 5G New Radio (NR) device certification by PTCRB, a certification forum comprised of select leading cellular operators, accelerating commercial availability of 5G mobile devices across the ecosystem.”
Keysight says its solutions “span the entire workflow, from simulation, development, and design verification, to conformance and acceptance test, and into manufacturing.”
Lastly, Cisco Systems, Inc. (CSCO) was chosen by Jason Williams, editor of The Wealth Advisory. Here’s what Jason has to say: “Cisco Systems, Inc. designs, manufactures, and sells internet protocol (IP)-based networking and other products that are related to the communications and information technology industry worldwide.
“The Luxtera deal will be finalized. Cisco will buy the semiconductor company for $660 million and incorporate its tech across the intent-based networking portfolio. This gives Cisco a major advantage in the optical chip market. Although the shares have been relatively flat so far in 2019, I expect that we’ll see a recovery to early-October 2018 levels by this summer. I highly recommend adding shares.”
Cisco reports that it has 40 service providers actively trialing and deploying its 5G offerings, and has inked new or expanded deals with half a dozen global network operators. The company is focusing on its cloud mobile network.
Just to name a couple of its alliances—Verizon is going to use Cisco’s software-defined wide area network platform to support mobile 5G devices, for SD-WAN for campuses and branches. And Cisco will be providing its network convergence system 540 routers, for Sprint.
As 5G evolves, we’ll see plenty more investment opportunities, but these companies are a good start!
Nancy Zambell, Editor of Wall Street’s Best Investments, has spent 30 years helping investors navigate the minefields of the financial industry. Nancy scours more than 200 advisories and research reports to select the top recommendations, which she collects for you in this easy-to-read digest.Learn More
*This post has been updated from an original version, published in 2018.