- The smartphone industry has been in a rut over the last two years as consumers have held onto their mobile devices for longer periods of time.
- But next year could mark a turning point for the industry with the transition from 4G LTE to 5G high-speed wireless internet, says Cristiano Amon, the president of market-leading mobile chipmaker Qualcomm.
- That's largely because many consumers who have held onto their mobile devices for the past several years will be enticed into upgrading, he said.
- Companies like Samsung and Motorola now make some models which support 5G, making it more realistic for customers to make the switch. Apple is also rumored to release a 5G iPhone in 2020.
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It's been a rough couple of years for the mobile phone industry. But Cristiano Amon, president of market-leading mobile chipmaker Qualcomm, says it's all about to turn around, thanks to the rise of 5G high-speed wireless internet.
Qualcomm - which produces the chips that power smartphones from manufacturers like Samsung, LG, and OnePlus - predicts that 5G smartphone shipments will reach 450 million in 2021, and that 750 million 5G phones will be sold in 2022.
That would be a healthy shot in the arm for the stagnant smartphone market, which has largely flattened as consumers hang on to their smartphones for longer than ever.
Global smartphone shipments have only just started to rebound after the market experienced consecutive quarterly declines over the past two years. Shipments grew by 2% in the third quarter of 2019, marking the first sign of growth in two years, according to Strategy Analytics. That echoes findings from International Data Corporation (IDC), which reported that global shipments increased by 0.8% year-over-year in the third quarter of 2019 after seven quarters of back-to-back declines.
This year has seen some slight traces of growth, thanks to the popularity of new models like the Apple iPhone 11. Qualcomm's Amon says, however, that s that 5G is going to mark a significant turning point for the smartphone market that will bring a real market acceleration.
"It's a big transformational technology," Amon said in reference to the deployment of 5G. "It's going to happen in large scale, [and] it's going to be faster, the migration, than 4G."
5G phones are already here
There are a few reasons why the smartphone industry has struggled to grow in recent years. Customers are holding onto their devices for longer periods of time and therefore aren't upgrading as frequently. New premium flagship phone models from companies like Apple and Samsung in recent years have also offered smaller, mostly iterative updates over their predecessors, like improved cameras and faster processors. That can make it difficult for smartphone makers to convince consumers to pay $1,000 or more to upgrade to their new flagship devices.
But this is going to start to change starting in 2020 as 5G networks become more prominent. The benefits that 5G network compatibility will bring to smartphone owners - such as more reliable connections that enable stable internet performance even in crowded areas, and sufficient bandwidth to run high-end apps and games from the cloud - could drive acceleration in the industry, Amon says.
There are two key reasons Amon sees 2020 as being a pivotal year for smartphone shipments. First, many smartphone makers already offer phones that support 5G, including Samsung, Motorola, and OnePlus, so those in the market for a new phone already have several options to choose from. Apple, meanwhile, is also rumored to release its first 5G smartphone next September.
And in the interim, Amon notes, a 5G phone purchased today will still work on existing 4G networks.
"The best 4G phone you can buy is a 5G phone," Amon said.
'Pent up demand' for new phones will drive faster replacement rates
Second, consumers that have been holding onto their phones for the last three to five years are likely to be ready for an upgrade in 2020. That represents a drastic difference compared to roughly 10 years ago when 4G networks were launching in the United States and upgrading your phone every two years was the norm.
"I believe there is some pent-up demand," Amon said.
As 5G gradually phases out 4G to become the standard network in the United States, there's a chance that app makers will create digital services that require the level of connectivity and performance that can only be achieved with 5G - with Google's new Stadia video game streaming service being a prime example of something that could only benefit from faster wireless internet.
This larger trend, too, could entice consumers to upgrade starting next year.
"We're going to see [a] faster replacement rate and we have conditions for that to happen because phones are older," he said.
Amon isn't the first to make such predictions. Some Wall Street analysts have also previously anticipated that the introduction of 5G in 2020 will be a big catalyst for driving iPhone upgrades in particular.
"5G has been designed to solve another problem," Amon said. "Every technology needs to solve a problem. 3G was about providing wireless internet, 4G was about broadband on a phone. 5G is for a mature, wireless connected society."
