3 AUG, 2023
By RankiaPro Europe
5G has the potential to make an unprecedented impact across multiple sectors, surpassing what we have experienced with previous generations of mobile telecommunications.
Are we facing a real investment opportunity in 5G? To find out more, Ben Forster, Global Listed Real Estate Analyst at Schroders, and Yan Taw Boon, Thematic Fund Manager at Neuberger Berman, share their perspective.
Since 2010, the number of internet users worldwide has more than doubled to 5 billion. Meanwhile, the amount of internet traffic has increased more than 150-fold. Much of this growth has been driven by mobile data services, following the launch of the first iPhone in 2007. Forecasts indicate that this exponential growth in data will continue. The introduction of fifth-generation (5G) wireless communication is expected to drive an increase in mobile data traffic between 2020 and 2025.
(Note: EB per month refers to exabytes. This is a large unit of computer data storage, equivalent to one billion gigabytes.)
5G allows data to be transmitted at speeds up to 100 times faster than 4G thanks to a shorter wavelength. The downside is that these signals travel over shorter distances and cannot penetrate as easily, requiring much denser network coverage. Mobile network operators (MNOs) are now competing to lease more antennas on macro towers, fibre optic cable and small cells to provide this coverage. Forecasts point to a mobile investment of USD 1.1 trillion in the period 2020-2025.
As 5G advances, consumers, governments and businesses see digital infrastructure as “vital”. The industry’s total capital expenditure to 2035 is expected to exceed that of water, rail and airport infrastructure.
Against this backdrop, we expect customer demand for digital infrastructure to continue to grow and offer interesting investment opportunities.
The world is on the brink of a 5G revolution. Many industries are being transformed by the staggering leap from 4G to 5G. Driven by the evolution of this high-speed, hyper-connected, low-latency technology, 5G has many transformative applications. 5G has many transformative applications, from connected factories with real-time automation to remote surgery in the healthcare industry. A number of new and emerging technologies that enable the 5G ecosystem are presenting significant investment opportunities.
The semiconductor industry is one of the key drivers of 5G evolution. It provides the backbone of computing power in our digital world. We believe the semiconductor industry will be “stronger for longer” benefiting from favourable supply-demand dynamics, which will drive a sustainable increase in pricing power. Semiconductors are at the centre of current geopolitical tensions. Their strategic importance is intensified by their role as a key driver of technological advances in the global economy. As a consequence, we are seeing this industry benefit from global stimulus and inter-national rivalry, as supply chains move “onshore” and domestic investment and political support accelerate.
One of the technological advances that is driving the 4th industrial revolution is Artificial Intelligence. The emergence of generative AI has far-reaching implications for content generation and efficiency and will lead to significant productivity gains. The advances and accelerated adoption of this technology are changing the rules of the game for the 5G ecosystem. Demand for computing and connectivity infrastructure is increasing exponentially. This is triggering a race between technology giants around the world. This is leading to a significant increase in investment in key areas of the data centre and semiconductor infrastructure value chains.
Elsewhere in the 5G value chain, there are attractive investment opportunities. For example, in the industrial sector, where the proliferation and acceleration of the Internet of Things is helping to drive efficiency, automation and electrification in areas such as logistics, supply chain management and remote monitoring.