Wireless networks 20 times faster are just around the corner.
In January, Qualcomm (QCOM) announced a partnership with six leading Chinese smartphone manufacturers to begin rollout of 5G networks in 2019.
That is years ahead of schedule. And the implications for investors are significant.
We are living in an era of exponential progress. Information technology is benefiting from the intersection of powerful cloud computing networks, big data analytics, and artificial intelligence.
Innovation that was science fiction a decade ago is not only possible, but investment opportunities are also developing right now.
And 5G stands out as a real game-changer.
Next-generation networks promise data download speeds of 20 GB per second. Today’s LTE networks, a great as they are, pull speeds of just 1 GB per second.
Liam Griffin, the CEO of Skyworks (SWKS), put the speed gains in perspective …
With 3G, it took about a day to download an HD movie, he told CNBC’s Jim Cramer, in 2017. LTE slashed the time to minutes. A 5G network would reduce the wait time to seconds.
That kind of speed changes everything. Latency would disappear. Engineers could build networks of connected vehicles that would relay relevant traffic information, and automatically maintain safe driving distances. Telemedicine would become viable. Imagine a world where doctors in Boston use cutting-edge robotics to perform delicate surgeries in Mumbai. Drones and self-driving cars would be able to build real-time 3D maps to operate more efficiently.
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The stakes are high.
“5G will be the backbone of our digital economies and societies worldwide,” said Günther Oettinger, a European digital commissioner.
He’s right. And for Europe, the situation has become desperate.
With Nokia and Ericsson, it was once the world leader in fast networks. Today Europe’s star is falling fast …
Venture Beat reports that two-thirds of Koreans enjoy 4G. The U.S. and Japan have adoption rates at 45% and 42%, respectively. In Europe, the metric is just 10%.
In 2015, Europe started coordinating efforts with China. It has similar agreements with Japan and South Korea. The goal was to implement joint research, identify the most-promising radio frequencies and promote global standards.
The Qualcomm deal with Lenovo, Oppo, Vivo, Wingtech Technology, Xiaomi and ZTE leaves the European Union on the outside, looking in.
The San Diego chip designer has been at the vanguard of 5G research. Now it has its stake planted in the heart of the most-important wireless market in the world. In 2017, Counterpoint Research found that seven of the top 10 global 3G/4G smartphone manufacturers are Chinese.
Statista, an online research group, notes that there are currently 663 million Chinese smartphones in use. By 2022, that number is expected to grow to 817 million.
All of this means research and development of 5G applications will progress more quickly.
Qualcomm executives note that Chinese manufacturers are already making plans to use its 5G Pioneer initiative to build artificial intelligence and Internet of Things applications.
That should be the key takeaway for investors. 5G is going to lead to next-generation applications and new business models. And it is going to happen quickly.
Among self-driving car plays, I pushed my members to take positions in Nvidia (NVDA) two years ago. It has been a big winner and remains attractive on inevitable pullbacks.
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Aquantia (AQ) was an IPO last November. On paper, the company makes rather dull electronic components — integrated circuits for legacy Ethernet connectivity.
In the next era of autonomous vehicles, sensors, touchscreen monitors, electric motors and onboard supercomputers will need multi-gigabit connectivity over copper connections. That is Aquantia’s field of expertise.
And there are other attractive robotic surgery and drone companies, too.
The bottom line is all these investment opportunities are being pushed forward by 5G. Most investors are not even aware it is happening, nor how quickly innovative applications and new business models will begin rolling out.
Jon D. Markman