Shift of Value Creation: Is This Time Different?
Throughout the 4G cycle, we have seen value creation initially captured by semiconductor companies enabling cellular connectivity and then shifted towards device makers such as Samsung and Apple, and finally monetized by software and services companies providing various use cases powered by 4G. We borrow a chart from Morgan Stanley below to make our point. Transitioning to the 5G era, however, we’ve seen synchronized development work on 5G rollout, rather than a sequential road map that played out in the 4G cycle. This is evidenced by companies presented at Barclays TMT conference on Dec 11-12 in San Francisco.
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Keysight, a market leader in test and measurement equipment, sees 5G development work more synchronized compared to a more serial progression in 4G. Similarly, Qorvo, a leading supplier of both smartphone and infrastructure RF components, alluded that 5G handsets seem to be front running investments in 5G infrastructure as more sophisticated consumers want to enjoy the benefits of 5G smartphones when infrastructure does catch up. Is the 5G cycle different this time? We shall see.
"...Certainly in prior generations and this is muted a little bit in 5G intended happen a little bit serially right there. The chipset guys go first, then the base station guys, then the handset guys. We're seeing a little bit of that but it tends to be a lot more parallel development, given the complexities of 5G, it's kind of forced to everybody to kind of be working on commercializing these technologies at the same time." -- Keysight
"...I think our views change, our view has changed to what I talked about earlier, and that the handset seems to be front running the investment and infrastructure. And I think that's again driven by a more sophisticated consumer that understands, that their attributes associated with 5G that the consumer wants to enjoy or benefit from over the life for that phone when the infrastructure does catch up and so again we upped our -- changed our handset profile for 5G as a result." -- Qorvo
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