5G stocks: what industries will benefit from 5G?

The introduction of 5G technology around the world will have wide-ranging implications for existing industries and enable new markets to be created. We have a look at what 5G means for stocks.

5G Source: Bloomberg

Mobile communication is a vital tool for everyday life. Since the first analogue mobile phones started to become mainstream in the 1980s the technology has developed at a rapid pace. 2G was introduced in the 90s and brought us text and picture messaging before it was followed up with 3G which allowed us to really start getting the most out of the Internet on our phones.

4G, launched around a decade ago, is the current standard enjoyed by most in the developed world. 4G’s capabilities have allowed a swathe of new digital businesses to be created in sectors like video streaming and online gaming.

This year has seen the launch of the newest technology, 5G, that will work alongside existing 4G networks to improve speeds and connectivity. It marks the biggest technological jump yet and will have huge implications for existing products such as smartphones while birthing a string of new developments that many have been eagerly awaiting, like artificial intelligence (AI), virtual reality (VR) and autonomous cars.

You can read the first part of this 5G series here before deciding what 5G stocks to invest in to find out how 5G differs from 4G and learn about the opportunities and challenges the technology poses.

What industries will benefit from 5G?

Success is critical to a huge number of industries, not just the telecoms companies. Those preparing to launch the next generation of tech are unable to do so until 5G becomes commonplace.

5G is forecast to support a staggering £8.5 trillion worth of new goods and services by 2025, according to Qualcomm. Below is a look at existing markets set to benefit from the new technology and a selection of emerging ones:

5G: smartphone and chipmaker stocks

5G leads to speedier smartphones with increased capabilities. CCS Insights predicts they will make up 99% of all 5G connections until 2025. Numerous 5G-enabled phones have already been launched, many forming part of new service bundles. BT Group plans to offer 5G smartphones alongside its 5G home router and broadband, and both AT&T and Verizon plan to launch a Samsung phone in the first half of 2019. Verizon says the model will be a 'proof-of-concept' and powered by Qualcomm’s Snapdragon platform, modem and modules, which will also be used by a string of big brands including Fujitsu, Nokia, LG, Sharp, Sony, Telit and Chinese firm Xiaomi.

Read more: Shaky start for Chinese tech giant Xiaomi

Intel has signed up a string of hardware manufacturers that plan to use its 5G modems in new smartphones and other devices including Dell, Lenovo, Microsoft and HP. The firm has also partnered with a local firm, Spreadtrum, to launch a 5G phone for the fast-growing Chinese market in a move that could give it a unique edge over the competition.

Skyworks Solutions, which provides radio frequency chips for the wireless function of smartphones, has ensured it has moved early to release a 5G suite of products under its ‘Sky5’ family.

Apple did not rush to market with a new phone when 4G was initially launched and expectations are the same this time around. Numerous reports have surfaced that Apple won’t launch a 5G phone until 2020 at earliest because it would be too early for consumers to buy in to the benefits next year. Apple wants to be fashionably late to the party with a superior 5G phone rather than the first, partly because it is under pressure to justify ever more expensive iPhones as they are released. For the same reason telecoms is converging, Apple too is launching new services such as video streaming to bolster its pricey offering.

Read more: Apple vs Samsung

Other companies supplying key components for 5G technology include Qorvo, Cisco, Telit and Lumentum.

5G and the Internet-of-Things (IoT)

There is already over 10 billion connected devices in the world (IoT refers to smart devices that communicate with one another) and that is expected to double to 20 billion by 2020, according to KPMG. The speed and capacity of 5G will enable almost everything to be digitised.

The first IoT devices such as smart speakers have already started to be bundled into wider product and service offerings by the telecoms providers, and new ones are likely to be added as they come to market. Wearable devices like smart watches and virtual reality (VR) headsets will be among the first products to gain traction.

The founder of IoT firm Aeris, Syed Zaeem Hosain, said in August that 'people will wear clothes connected to the Internet, reading glasses will be connected to provide additional context to enrich the user’s experience, and more than one-half of the Internet traffic to homes will go to appliances and devices and not to children’s video games'.

5G: smart buildings and cities

The growing number of smart devices and increased connectivity that 5G offers will help create smart buildings, which in turn will lead to smart cities. The applications are wide-ranging but at a basic level a smart building is one that can use automated systems to regulate heating, ventilation, lighting, security and other systems. Automating a building’s infrastructure presents an opportunity to save on energy and costs.

Golden Saint Technologies is one of many companies looking to benefit by providing the infrastructure these buildings need, including wireless mesh technologies that help speed-up WiFi and facilitate higher definition security cameras. One advantage it believes it has is the ability to provide wireless services in urban and congested areas where installing new cables would be expensive and disruptive.

Smartspace Software (formerly known as RedstoneConnect) is a Software-as-a-Service (SaaS) business that designs software for occupancy management and space optimisation, which was taken up under a five-year contract by an unnamed 'leading international bank' in November.

Broadening the idea of smart cities are companies that are looking to improve public infrastructure such as traffic control. Tracsis supplies software to capture, report and optimise data for traffic control and also sells to the rail industry. Major UK public institutions like Network Rail, Transport for London and the Department for Transport all use Tracsis.

5G: artificial intelligence, virtual reality and augmented reality (AR)

AI, VR, AR and other visualisation technology such as holographic video will only be able to become a reality with 5G. The use cases for this type of technology are endless: revolutionising everything from advertising to entertainment and gaming, to medical imagery.

BT and Nokia are currently researching 5G for live virtual reality broadcasts that would allow someone to watch a music gig or sporting event live using VR headsets, and Vodafone’s trials have focused on using 5G to trial VR and AR in factories, hospitals and offices.

5G and autonomous driving

Self-driving, fully autonomous cars have been on the cards for a while but it is often underappreciated that this will not be possible without the fastest 5G that has low enough latency to provide mission-critical connections for crucial services like driving a car or carrying out robotic surgery.

Read more: Who will be the winners of the self-driving car revolution?

Tesla and other carmakers have long-promised that fully autonomous cars are only years away but many doubt the highest frequency 5G will be ready in time. It has not soured ambition and virtually every carmaker is trying to get there with the help of others. Intel, Mobileye and BMW plan to launch a 'full self-driving car' in 2021, and companies like Micron Technology have already released components that underpin autonomous driving.

5G: software and cloud providers

Cloud computing is a crucial element to 5G technology, with many services being hosted on the cloud and connected using 5G. This will mean the dominant players in the space, like Amazon, Microsoft, Alphabet’s Google and IBM will all see growth in this are over the coming decades as 5G becomes more common.

Read more: Where next for IBM’s cloud computing after Red Hat buy?

Other companies offering software of other services related to 5G include Casa Systems, which manages networks using its Axyom Software Platform, research and network testing companies Keysight Technologies and Spirent, and automation and network slicing specialist Ciena.

5G: smart and precision farming

Smart farming (also referred to as ‘precision farming’) will rely on 5G to improve the efficiency of global agriculture to meet the needs of the world’s growing population. This will be possible through the likes of Agrimetrics (Big Data), improving the accuracy of engineering, better protecting crops and helping speed up and better the research being carried out into livestock.

There is already a good choice of stocks operating in this sector. Yara International’s crop nutrition products are designed to help farmers increase yields and improve quality while reducing costs and the environmental impact.

In October, MTI Wireless Edge announced it had secured its first contract in Mozambique for its wireless irrigation control system in what it hopes will be a demonstration of the benefits and cost savings it can provide to farmers after ten years of sales in South Africa, where water shortages have become more common.

CNH International’s precision farming division has introduced new offerings like digital herbicide technology to bolster the efficiency in managing weeds and a product to clear blockages from harvesters to help save time and money.

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