1、The 5G era New horizons for advanced electronics and industrial companies Contents Executive summary 4 Introduction 5 1 A comprehensive view of the 5G value proposition 6 Archetypes of 5G IoT use cases 7 Companies poised to win 8 Myth versus reality in 5G IoT value capture 9 2 Promising B2B 5G IoT u

2、se cases 10 3 The 5G IoT value proposition for Industry 4.0 12 Distinctive 5G IoT use cases in Industry 4.0 12 Private-network opportunities 14 4 Opportunities for advanced electronics companies and industrials 15 The 5G IoT module market 15 The 5G IoT component market 19 5 Strategic implications fo

3、r advanced electronics companies and industrials 20 Advanced electronics players: Using B2C innovations to launch B2B opportunities 20 Industrial automation players: Becoming 5G ready now 20 Manufacturing players: Focusing on partnerships 21 3Contents The next generation of wireless connectivity, 5G

4、, is becoming a ubiquitous topic but is still the subject of many myths and misconceptions. Although various use cases are emerging, only a few are compelling enough to generate strong demand in the short term. To help advanced electronics companies and industrials gain clarity about the best opport

5、unities, we researched over 150 potential 5G use cases, focusing on the 5G Internet of Things (IoT) business-to-business (B2B) market, especially developments expected over the next few years. As part of our analysis, we reviewed the events that occurred during the introduction of 4G and other techn

6、ologies, since that could provide clues about how the 5G market might evolve. We also interviewed industry experts to see how they viewed 5Gs potential evolution. Many companies will derive great value from 5G IoT but it will come in waves The first 5G IoT use cases to gain traction will be those re

7、lated to enhanced mobile broadband (EMBB). Those for ultra-reliable, low-latency communication (URLLC) will follow shortly thereafter; use cases for massive machine-type communication (MMTC) will take several more years to gain ground. Businesses poised to benefit from the growth of 5G include mobil

8、e operators and net-work providers, component and module suppliers, machinery and industrial automation companies, as well as manufacturing companies. B2B opportunities abound, especially in Industry 4.0 Within the B2B sector, the most relevant short- term opportunities for 5G IoT involve Industry 4

9、.0the digitization of manufacturing and other production processes. In this segment, 5G will provide clear performance benefits for several use cases. The Industry 4.0 segment will account for sales of about 22 million 5G IoT units in 2030, with most applications related to manufacturing. In other B

10、2B segments, such as smart city, smart energy, and connected health, 5G IoT will be the technology of choice only for niche applications. The 5G module market is evolving At launch, 5G IoT modules will cost two to three times as much as 4G modules, but prices will steadily decline. In the B2B sphere

11、, total revenue for 5G IoT modules will increase from about USD 180 million in 2022 to almost USD 10 billion by 2030. By 2030, 5G low-power, wide-area (LPWA) modules are expected to account for almost 30 percent of total B2B 5G IoT module revenues. In terms of use cases, almost all value will initia

12、lly come from distinctive use cases where 5G IoT provides a clear performance benefit; few manufacturers will incorporate 5G into their devices simply to ensure future readiness. In 2030, 5G will be incorporated into devices primarily because it has become the industry standard; the use of 5G to ena

13、ble distinctive use cases with clear performance benefits will be less common. Its time for 5G players to revamp their strategies Advanced electronics companies should initially focus on B2B use cases that are similar to those now being deployed in the business- to-consumer (B2C) sector; over the me

14、dium to long term, they should focus on developing chipsets and modules tailored to specific applications. Industrial automation players should first focus on B2B use cases in which they can take advantage of existing B2C components; they should initially focus on early movers in the B2B space. Over

15、 the medium to long term, industrial automation players should create a com- prehensive portfolio of 5G IoT products. Manufacturing players that want to move ahead with 5G should create a long list of potential 5G use cases, prioritize the most distinctive ones, find partners to help develop solutio

16、ns, and initiate rollout at lighthouse factories. Manufacturing companies should consider creating private networks to support their efforts, so they do not have to depend on telecommunications operators. Executive summary 4Executive summary The next generation of wireless connectivity has arrived:

17、5G has the capacity to support a huge number of connections simultaneously while improving speed, latency, reliability, and power consumption for handsets and Internet of Things (IoT) devices. Spectrum auctions are almost complete, the first 5G-ready smartphones have hit the market, and network depl

18、oyment has begun around the world. Currently, most 5G innovations involve the business-to-consumer (B2C) market, primarily because network operators are attempting to optimize operational costs and handset makers want to differentiate their products. More recently, however, many new opportunities ha

19、ve begun to open in the business-to-business (B2B) sphere. As with the transition from 3G to 4G, advanced electronics companies and industrial players are still uncertain about the benefits of the new technology. Where is the value coming from, and who is going to capture it? What are the use cases

20、where 5G performance enhancements will generate most value and demand? Which applications will most benefit from 5G? Many companies did not ask such questions when 4G emerged and only achieved subpar returns. The danger exists that this scenario could repeat with 5G. To provide greater clarity on fu

21、ture value pools for advanced electronics companies and industrials, we investigated the 5G market through 2030, looking at over 150 potential B2B and B2C use cases, including their potential growth and technological requirements. We concentrated on 5G use cases related to IoT in the business sphere

22、, rather than the more predictable market for consumer handsets, because companies are still uncertain about the B2B spaceboth the areas for greatest value capture and the timeline over which 5G IoT applications will gain traction within business. We also looked at the introduction of 4G and other t

23、echnologies to understand how 5G might evolve and interviewed experts to understand market nuances. Our research allowed us to make projections about use case uptake, demand for modules and components, and other important developments. Notably, we uncovered numerous pockets of growth within the B2B

24、sphere. Advanced electronics companies that provide 5G modules and components can use this information to optimize their product portfolios. Similarly, the insights will help industrial players determine how they can enhance their operations, products, and business models through 5G technology. Intr

25、oduction 5Introduction Players are intrigued by 5G because it immensely improves speed, latency, reliability, and power consumption while supporting more device connections (Exhibit 1). Although 5G does not yet provide optimal results for all these dimensions simultaneously because of current techno

26、logical and infrastructure limitations, it will eventually become the technology of choice for critical communications that require extreme reliability and service quality, including those within industrial settings. 1 A comprehensive view of the 5G value proposition Exhibit 1 5G offers many advanta

27、ges over other wireless technologies Source: McKinsey analysis Note: Not all performance dimensions can be maximized at the same time. There are trade-offs between speed, range, energy efficiency, and latency. 1 Wi-Fi 6 802.11ax. Speed Latency and reliability Connections Device energy consumption Ra

28、nge 4G5GWi-Fi 61NB-IoT Speed: 100 times faster than LTE, with 1-10 Gb/s Latency and reliability: improvement from 20 ms to 1 ms with 99.999% reliability Energy efficiency: power consumption reduced by 90% Massive connections: 100- fold increase of supported devices to 1 mn devices/km2 61 A comprehen

29、sive view of the 5G value proposition Archetypes of 5G IoT use cases According to the 3rd Generation Partnership Project (3GPP), an organization that develops telecommunication standards, 5G primarily delivers value by enhancing three applications: Enhanced mobile broadband (EMBB), which provides fa

30、ster data rates across wide coverage areas to improve various functions, including ultra-HD video streaming Ultra-reliable, low-latency communication (URLLC), which increase the speed and quality of service in critical functions, such as the control of robots and drones Massive machine-type communic

31、ation (MMTC), which involves the automatic generation, transmission, and processing of data among numerous machines with little to no human intervention (for instance, to track goods along the supply chain). The adoption of 5G will likely happen in waves in major markets, with EMBB reaching mass ado

32、ption first, URLLC gaining traction soon afterward, and MMTC trailing the pack (Exhibit 2). For each application profile, adoption will largely depend on the availability of appropriate 5G chipsets, the speed and coverage of 5G network deployments, as well as the evolution of regulations. Exhibit 2

33、5G IoT growth will occur in waves, with EMBB applications gaining traction first Forecast 5G IoT unit sales, millions Source: McKinsey expert interviews and analysis 140 20224 60 262728292030 0 20 40 80 100 120 160 MMTC URLLC EMBB Projected start of accelerated growth 71 A comprehensive v

34、iew of the 5G value proposition EMBB applications are growing quickly because chipset manufacturers have already created 5G chipsets that enable this technology in smartphones. Chipset players are also designing similar products for B2B use. On the infrastructure side, mobile operators are significa

35、ntly investing in the 5G deployments essential for EMBB growth, currently focusing on large cities. For URLLC to gain traction, both 5G networks and chipsets must advance technologically. First, chipset manufacturers must expand their focus from mass-market EMBB and create specialized products optim

36、ized for reliability and latency. The development and testing of these chipsets will likely require about three to four more years, making it unlikely that URLLC-enabled devices will be widely used before 2023. Even as 5G grows, 4G will continue to exist and provide extensive coverage at lower cost.

37、 In con- sequence, MMTC applications that require low- power, wide-area (LPWA) coverage will continue to rely on 4G technology over the next few years. MMTC-enabled use cases using 5G networks will not gain traction until 5G coverage is available outside major citiesa development not expected until

38、at least 2025. Current 4G LPWA modules are expected to achieve 5G compatibility through software upgrades, since 5G standards include 4G specifications. But companies are also developing new 5G LPWA modules from scratch with additional features that distinguish them from modules upgraded from 4G, in

39、cluding lower device-level energy consumption and increased or more flexible data rates. In this article, we focus on newly developed 5G LPWA modules, rather than those upgraded from 4G. Companies poised to win The growth of 5G will benefit many businesses both users and suppliers of this technology

40、 or related infrastructure. For instance, operators and network providers will be able to enhance network performance, capacity, and customer experience. Within advanced electronics, our analysis suggests that three groupscomponent and module suppliers, machinery and industrial-automation players, a

41、s well as manufacturing playersare particularly well positioned to realize gains. Component and module suppliers Leading IoT module providers are also exploring how they can position specific products in the market. Both component and module providers are investing in R we created alternative scenar

42、ios that showed declines of up to 20 percent. Companies will create standard and special- purpose 5G modules by upgrading existing 4G modules. Existing 4G LPWA modules can be made 5G compatible through software upgrades, but some companies are creating new versions from scratch to increase energy ef

43、ficiency and provide higher data rates. As noted earlier, our analysis of 5G LPWA modules focuses on modules created from scratch. Price evolution We expect 5G modules to cost two to three times as much as 4G modules at launch. In 2020, the average selling price will be approximately USD35 for 5G LP

44、WA modules, USD 80 for standard modules, and USD 180 for special-purpose modules in our base case (Exhibit 6). We created our estimates based on baseband prices for the first 5G smartphones and current prices for 4G technology. The predicted price increase from 4G to 5G is in line with premiums seen

45、 with previous technology advancements. For example, 4G was about 200 percent more expensive than 3G in its first year of launch, while 3G HSPA+ was about 330 percent more expensive than 2G edge premium. As with previous technologic advances, we expect the average selling price of 5G modules to decl

46、ine steadily. In our base case, we predicted that values will fall by 10 percent per year through 2025.2 After 2025, prices should stabilize, because new add-on features will offset decreases in the average selling price. If this occurs, prices will be about USD 20 for 5G LPWA modules, USD 50 for st

47、andard modules, and USD 105 for special- purpose modules in 2030. 4 Opportunities for advanced electronics companies and industrials 154 Opportunities for advanced electronics companies and industrials Exhibit 6 180 80 35 180 2020272926212225 60 2324282030 0 20 40 80 100 120 140 160 50 105 20 105 50

48、 20 The average selling price for 5G IoT modules will decline and then stabilize, in line with historic price evolutions Source: McKinsey analysis Estimated average selling prices, 5G IoT module vs 4G IoT module, 20201 USD Estimated average selling prices, base case USD 180 80 35 78 34 15 Special pu

49、rpose Standard LPWA 4G IoT module 5G IoT module 1 Estimates based on 4G/5G handset baseband prices (Q2 2019) and expert judgment for 4G/5G IoT baseband prices and total module cost split. 2 We focus on newly developed 5G LPWA modules, rather than those created by upgrading software in 4G modules. The newly developed modules have lower energy consumption and higher data rates than those created by upgrading 4G modules. Standard Special purpose 5G LPWA Newly developed 5G modules with higher specifications2 4G modules no