Emerging & Frontier Markets
Fifth generation technology is the next step in the evolution of digital communications. Faster transfer of data, lower latency, reduced congestion and increased connectivity are just some of the improvements 5G will bring. In 2018, mobile technologies and services generated $3.9 trillion of economic value, which equates to c. 4.6% of GDP. GSMA estimates that the economic contribution of mobile will increase by almost $850 billion by 2023 and 5G will contribute $2.2 trillion to World GDP by 2034. (Source: GSMA June 2019)
We believe 5G will not only facilitate the population’s voracious appetite for data, it will accelerate our consumption and pave the way for seamless connectivity and improve productivity worldwide.
The United States and South Korea launched 5G commercially at the end of 2018 with 16 more countries launching during 2019. The Chinese government has awarded 5G spectrum licenses to all three telecommunications companies in order for them to conduct trials before commercial roll-out in late 2019. However, the majority of 5G deployments will happen after 2020 and will be dependent on 3rd Generation Partnership Project (3GPP) standards. Huawei is an essential and integrated part of 5G as the company holds a substantial amount of 5G patents. Equipment vendors generally adopt a cross-licensing model which makes it very difficult to exclude Huawei from 5G network participation. The company has filed 1,975 5G patents, more than Qualcomm and Intel put together.
John Malloy and James Johnstone co-manage the RWC emerging and frontier markets team. The team is composed of a further 17 analysts, economists and strategists based in Miami, London and Singapore, many of whom have worked together for over twenty years. The team joined RWC Partners in 2015 and now manages c. $9bn for its clients. Emerging and frontier markets represent the fastest growing countries in the world. The RWC team believes the continued growth in these markets represents opportunities across a range of industries.The highly experienced and dedicated team takes an index-agnostic, opportunistic approach which allows it to explore investment opportunities that are often off the beaten track.
Increase in economic contribution of mobile services by 2023
Estimated contribution of 5G to global economy by 2034
Augmented/Virtual Reality While 5G will likely bring down the per bit cost of delivering an ever-increasing amount of video data, the higher speeds and lower latency of fifth generation may significantly increase the penetration of cloud gaming, augmented and virtual reality. Current cloud game platforms do not generally provide levels of image quality greater than 720 pixels. The introduction of 5G is expected to offer image quality of 4,000 pixels at 90 frames per second. Additionally, most augmented and virtual reality is highly data intensive.
AR/VR Applications to Roll Out in Stages
Diverse Potential of AR/VR
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With the power of fifth generation technology, the IoT phenomenon will likely grow exponentially. GSMA estimates that most of the value of IoT from now through to 2025 will come from applications, platforms and services which will increase by roughly $600 billion. 5G is the first wireless technology with high throughput, low latency and high reliability to replace wireline connectivity
in factories. Consequently, industrial IoT will also likely see robust growth
as manufacturers move towards a leaner cost structure, digitalisation
and flexibility in processes and production through methods such as condition-based monitoring. ABI Research estimates that by 2025 there
will be c.90 million condition-based monitoring connections. Over time, enhanced IoT will lead to the evolution of smart cities which we believe
will likely enhance productivity.
Internet of Things
Forecasts and estimates are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The forecasts and estimates are based upon subjective assumptions about circumstances and events that may not yet have taken place and may never do so.
5G is still at nascent stages of development. While expanded bandwidth, lower latency and increased connectivity will boost productivity in economies that adopt fifth generation technology, investment opportunities will likely differ from country to country. We believe the team’s experience in analysing technology, telecommunications regulation in addition to geopolitics will likely help uncover the best investment opportunities relating to a phenomenon which will change the course of connectivity. Additionally, as mentioned above, the risk to these companies considering their hard-ware related nature is a continued deterioration in trade negotiations between the China and the US which could lead to significant potential downside.
Economic contribution of mobile services will likely increase $850 billion by 2023
5G will likely contribute $2.2 trillion to the global economy by 2034
Number of 5G patents filed by Huawei, more than Qualcomm and Intel put together
No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment
*Source: GSMA June 2019.
Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. Forecasts and estimates are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The forecasts and estimates are based upon subjective assumptions about circumstances and events that may not yet have taken place and may never do so. The names shown above are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations or advice.
Source: GSMA June 2019
Source: GSMA June 2019
, Industrial Safety Review 2018
Source: GSMA June 2019
The statements and opinions expressed in this article are those of the author as of the date of publication, and do not necessarily represent the view of RWC Partners Limited. This article does not constitute investment advice and the information shown above is for illustrative purposes only and should not be construed as a recommendation or advice to buy or sell any security.