convenience or for creating a sense of superiority, they come in and out of favor like social media stars, with some lasting weeks and others more firmly engrained in societal culture.  MIMO has been around as we know it today since the 1990’s but over the last few years has become a buzzword used in 5G commentary, and while we will not go into the extensive detail that can surround MIMO technology, we see it as an important part of understanding 5G basics for investors.
5G has brought buzzwords like MIMO and Beam-Forming to the forefront, and while they have a variety of meanings according to those in the industry and can be used to denote some rather broad technical systems, , investors should known at least the basics to better understand the ins and outs of 5G and digital communication.  2G systems were typically based on TDM (Time Division Multiplexing) where two data or voice streams were sent over one channel by separating each conversation into ‘chunks’ that are sent over the channel in alternating sequence, essentially taking turns, with a synchronization channel making sure the receiver puts them back correctly.  3G is based on spread spectrum technology, where the data is broken into ‘chunks’, with the chunks being spread across frequencies rather than by time, and reassembled by the receiver, making them less susceptible to interference.
4G uses  OFDM (Orthogonal frequency division multiplexing) that encodes the data on a number of carrier streams at different frequencies that carry the data in parallel streams.  They are reassembled at the receiver using sophisticated algorithms and help to diminish what is called multipath interference, where some data ‘chunks’ that make up a signal take a slightly different path than others, due to atmospheric issues or other reflective surfaces, and reach the receiver at different times.  5G is a similar technology that uses higher frequencies that allow greater bandwidth. 
As these technologies developed commercially, antennas, which were typically a device able to receive a broad spectrum of signals, such as those described above.  By expanding the number of antennae and focusing each on more specific frequencies, the accuracy of transmission is increased, and the ability of retransmission (tower to tower) is also increased, closer to a mesh system where all points would talk to all other points.  MIMO stands for Multiple In Multiple Out on a general basis, and was an outgrowth of the evolution from 2G’s 1T1R (One transmitter, One Receiver) set-up that eventually became 2T2R and now 4T4R, describing the number of transmitting and receiving antennas used in base stations.    Wireless LANs use MIMO, which allows for more data streams and therefore faster throughput and some smartphones have moved from 1x1 (one sending antenna and one receiving antenna) to 2x2, with an increasing number of high-end smartphones now including 4x4 MIMO internal systems, which should give them a transmission speed advantage over less sophisticated smartphones as long as the carrier is using MIMO.
As can be seen in Figure 4, the latest configuration takes MIMO one step further adding multiple antennae configurations that multiply the ability of such systems to give data multiple receiving points to accept data, giving  such systems a better chance that the data ‘chunks’ will arrive intact at at least one of the multiple receiving antennae before being reassembled.  This coupled with the increased bandwidth, speed, and lower latency of 5G continue to improve voice and data transmission and work toward a migration toward higher 5G frequencies such as those used for mmWave.  As mmWave signals are more subject to distance and blockage issues, the use of MMIMO helps to create multiple paths for transmission over such systems and will bebefit users as the technology develops further.
There is a cost to pushing MMIMO down to the mobile level, and that is the increased cost of multiple antennae systems and the physical space they take up in smartphones, which are extremely space constrained.  That said, as the trend toward multiple cameras slows, freeing up valuable internal real estate MIMO phones will migrate further down the smartphone value chain and costs will decline, the trade-off being one less camera, that is rarely used, against faster and more reliable communication, which is what smartphones are supposed to be all about…

Mobile communication has become an increasingly important part of human existence, with mobile data traffic growing at a 27.2% CAGR[1] between 2019 and 2028.  That traffic will increasingly be using 5G technology, and while this year saw a slowdown in 5G expansion on a global scale, as an inflationary cycle stunted carrier expansion, over that same period 5G mobile data will see a CAGR of 67.4%.  While, as consumers, we are used to the characteristics of 2G, 3G, 4G, and more recently 5G mobile communication, those same transport protocols and networks can also be used for FWA, or Fixed Wireless Access, the wireless equivalent to copper or fiber typically used to connect residential or commercial customers.
FWA, in most cases, is based on 3G or 4G technology, with relatively new 5G services piggybacked on existing infrastructure (NSA 5G), but as 5G transitions to SA 5G (Standalone) network architecture, its advantages over 4G LTE become more apparent and its applications expand.  At the same time FWA applications will also transition to 5G, adding to the benefits of FWA, and as can be seen in Figure 2, FWA as a percentage of total data traffic, grows.  We note that while the growth of Mobile data traffic for the combined 2G, 3G, 4G, and 5G modalities is declining, much of that comes from the elimination of 2G and 3G technology and the adoption of 5G on a global basis, given the much higher data rates that 5G is capable of.  That becomes evident when looking at carrier data in the US, where T-Mobile (TMUS) saw its user base for its FWA service reach over 1.5m users in 2Q this year[2], for a ~72% CAGR, while AT&T (T) saw 4.7% growth and Comcast (CMCSA) saw only 0.6% during the same period, both of whom offer fiber or cable only service.
There are issues that can hinder the use of 5G for FWA, particularly the necessity for higher tower density for 5G, which is certainly an issue for carriers, and this has even limited T-Mobile’s seemingly rapid growth of its FWA services.  Growing the availability of 5G FWA, meaning carefully mapping tower building against potential customers, and limiting new FWA customers to match available local bandwidth, is necessary so as not to reduce the benefits of 5G’s low latency and high speed transport.  Therefore, we expect FWA, especially the 5G component of FWA, to grow at a more measured rate, but given the benefits of 5G technology, and its ability to reach customers where cable or fiber is not economically feasible, we expect FWA to continue to grow both in its user base and in the percentage and net amount of data traffic it can move.  Local and global economics will certainly have an effect on FWA growth, but in the long-run we believe the benefits of 5G FWA will allow it to continue to gain an increasing user base, especially in areas where only one hard-wired carrier is offered.


[1] 2019 – 2028 – Source: Ericsson Report 2022

[2] The service was initiated in early 2021.

5G growth continued in October, across  number of metrics, including new 5G phone models, however the rate of 5G smartphone growth slowed significantly in October to 1.3% m/m, the same growth rate as seen in February, usually the lowest point in the year.  While the obvious broad CE slowdown and the continuation of weakness seen in the smartphone space have taken their toll on 5G phone growth, we were surprised that there was any growth in new 5G offerings at all in October.  All in, it was a better than expected month for 5G but we temper our 5G expectations for the holiday season, both here and in China (January 22, 2023).
 

There has been little positive to say about the smartphone market this year, and as 3Q data comes out over the next few weeks, we have little hope that there will be any meaningful improvement, other than on a company specific basis, with expectations for a 3rd consecutive quarter of declining sales.  While 5G is a subset of smartphones sales and shipments, the segment continues to grow on an absolute basis with 5G smartphone device offerings growing 4.8% in September, up 65.8% y/y and up 41.2% YTD.  China however has been seeing a more difficult smartphone situation this year, with cumulative shipments through July down 23.0% over the same period last year, while 5G smartphone shipments on the Mainland are down 17.8% over the same period.  While we would not categorize China’s 5G market as ‘mature’, 5G in key cities has been available for some time and we expect the slow growth this year, indicates that China’s 5G smartphone growth has begun to fall into the category where it is more greatly affected by the smartphone market globally and in China than it has in the past, and with a ~60% 5G subscriber rate the days of ‘early adopter’ momentum are likely over.
On a global basis however, 5G is still progressing, with September data indicating m/m growth in almost all major categories as to device offerings and vendor growth.  We note that we expect form factor growth, while up 9.1% YTD, to remain relatively flat for the remainder of the year, as it represents new 5G devices categories, many of which have already been developed.  The number of new 5G vendors has seemingly leveled off at roughly 1.5% for the last few months, which translates to 3 to 4 new 5G vendors each month (over 200 now), but given the large number of vendors already involved in  the 5G market, we expect to see relatively little growth  in that category going forward.
More import however is the growth in 5G smartphone device offerings, which, as of September, total 1,579 of which 867 are smartphones.  As can be seen in Figure 2, overall 5G device growth has continued through the year, with smartphones leading that growth, up 41.2% YTD and 65.8% y/y and 333.5% over two years.  CPE (Customer premise equipment) devices, which would be the equivalent to the ONT (Optical Network terminal) box that connects fiber from outside to your modem and router, is helpful in understanding carrier adoption of 5G as an FWA (Fixed Wireless Access) product that can be used in a home or office, which would compete with fiber or cable, a much more ‘emerging’ market than 5G mobile.  FWA is expected to account for ~20+% of all mobile network traffic by 2026, so while the growth is has been relatively slow as 5G is being built out, we expect the number of offerings to continue to increase as the user base grows.
All in September for 5G seems to have held up better than almost any other aspect of the smartphone market, and while it is still affected by the overall smartphone specific and global macro environment, carriers in developed countries continue to roll out coverage and add 5G subscribers, with governments in other countries now beginning to allocate b5G bandwidth to local carriers.  We expect 5G growth globally to continue based on C-band auctions, as C-band spectrum represents a tradeoff between lower performing 5G bands that have vast coverage and high frequency bands that travel very limited distances.  As C-band is an attractive alternative, we watch the proliferation of C-band auctions and deployment around the globe to better understand the potential growth in 5G subscribers.  As such we remain optimistic that 5G is still in an a growth stage globally, and that while the overall smartphone market is a product of the macro environment, 5G growth is only partially affected by those factors and will continue to grow as countries begin or continue to grow their carrier  and customer bases over the next few years.

The smartphone market remains weak, with positive momentum, if any, coming from the recent release of the iPhone 14 family and the heavy promotion Samsung Electronics (005930.KS) is doing for the Z Fold 4 and Z Flip 4 models.  It is a bit early for 3Q smartphone shipment data, however based on mobile display panel prices alone, we expect the 3Q smartphone shipment and sales numbers to be down again in 3Q, after a 7.5% q/q and 6.3% y/y decline in 2Q.  While the panel price decline does not track directly with shipments, it gives some indication as to the potential for another decline in smartphone shipments in 3Q, despite the typical build for the upcoming holidays.

5G smartphones continue to grow, with July seeing the number of available 5G smartphone growing 7.1% m/m and up 83.8% y/y (410.5% over 2 years), while the number of vendors offering 5G devices (phones, CPE equipment, Routers, etc.) up 3.1% for the month and up 39.2% for the year in this very weak mobile device market.  While not a ‘study’ in that we cannot compare to-date y/y data, however anecdotally, for all of last year 5G smartphones represented 42.6% of all smartphone models as compared to 50.3% this year to date.
Sub 6  spectrum is still the choice for the majority of 5G smartphones, while Apple continues to support both Sub 6 and mmWave, however the necessity for mmWave tower locations to be considerable more dense than Sub 6, makes it more costly to deploy, limiting it to use in private networks, large venues (stadia, malls, etc.) and dense urban areas.  Currently our data suggests that 42% of available smartphones are able to utilize mmWave frequencies (including those phones that can use both), while 58% are Sub 6 equipped only.
All in, we expect that 5G smartphone availability will continue to grow throughout 2023, albeit at slower growth rates as it penetrates further into the smartphone ecosystem, but will become more subject to the macro CE environment as the technology becomes commonplace to consumers.  While based on advertising, one would expect that the entire US is now able to provide 5G service, we show the coverage maps for the three major US carriers and note that only the purple lines indicate 5G coverage, leaving vast areas across the US where 5G is still unavailable.  As that infrastructure continues to be built out 5G smartphones will be the natural choice for those looking to replace or upgrade.
 

While it is hard to put much faith behind estimates out 5 years in the CE space, we do commend those that are willing to make such predictions, despite the fact that once they are public record they are open to recall in later years, which can lead to a bit of apologetic behavior if they are considerably different from the reality at that later date.  That said, if Yole Group is willing to put 2027 numbers into the ether, we believe they should be looked at. We summarize their estimates for smartphone units broken down by network technology below:

5G is a big topic for the CE space as it is cited as a driver for smartphone growth, a key to autonomous vehicle proliferations, a driver for AR/VR, and the basis for widespread IoT data collection, so it gets considerable ‘low-tech’ press coverage, especially when it becomes a political football for those who believe it makes a difference to the lives of everyday consumers whether the US is ahead of China in deployment, speed, or other nonsense, but there are some technical issues which make 5G different and more complex than 4G and are necessary to understand if one is to develop a realistic picture of 5G as it is deployed across the globe.
To begin with, as we have noted in the past, 5G performance is based on spectrum, which tends to be defined as three bands, with a number of gradations, but one of the most important characteristics of 5G is its coverage (area) is determined by the spectrum band, with lower frequencies covering a wider area, while higher frequency bands cover a smaller area.  Logic holds that the smart move would be to deploy low band spectrum to reduce the number of base stations needed for maximum coverage, however while the lower bands offer greater coverage, they operate at slower speeds, and one of the key selling points for 5G is its speed improvement over 4G.  This leads carriers to spend much capital in the lower bands, especially in the early years of deployment, with the future intent of adding higher band capacity after coverage of major population areas has been completed.
While this is a relatively successful strategy from the carriers standpoint, and certainly the most cost effective, it has a tendency to short-sell just the 5G characteristics that consumers want, higher speeds and low latency, and given the ever declining premiums carriers are able to charge for premium services, carriers will find that the competition will continue to push them toward higher 5G frequency bands to provide increasingly higher 5G connection speeds and lower latency, particularly for business customers. This leave carriers in the unenviable position of having to continually build out more base stations in order to maintain coverage at higher frequencies.
There is a solution however, and that is the use of what are called small cell base stations (about the size of a pizza box), as opposed to the ones we are more used to seeing on towers, which are called macro cell base stations (50 to 200 ft. high)(, and femto cells, a cell with the footprint of a paperback book.  While expensive macro cells give carriers early coverage, small cells allow higher frequencies to be used, increasing speed and reducing latency and can be easily situated on existing structures, such as light poles as we have noted previously.  At a cost of less than a macro cell, small cells can be deployed over the same area, enabling the carrier to offer subscribers higher speeds and lower latency, but we note that small cells need to connect to the core network through a dedicated link, which could be copper or fiber.  This can limit their ability to be located where coverage is needed and potentially increasing the operating cost of the small cell, but a number of other solutions exist for connecting small cells to the network core.
Wireless small cell backhaul options that allow small cells to communicate with the macro cell with the option to communicate to other small cells if that communication link is affected by weather.  This can be accomplished using Sub6, microwave, mmWave (5G high frequency) and satellite spectrum, each with its own positives, negatives, and best case applications[1] , while femtocells, which would typically be used for local applications such as malls, hotels, offices or homes, connect back through the internet, essentially sharing bandwidth and creating what are small ‘private networks’ rather than small cell networks, which are public.  Think of femto cells are wireless routers with limited coverage while small cells are more akin to roof top cell installations seen in towns and cities that create local hotspots.
Despite the relative immaturity of the 5G small cell market, the rapid increases seen in data traffic will push carriers to upgrade networks to 5G, and with a relatively limited number of potential macro cell sites and available 5G spectrum, small cell carrier deployments are expected to grow rapidly starting in late 2024 and 2025, while their use in industry for private networks has already begun, particularly as such locations already have wired backhaul options available, but such predictions have been made before, with small cell deployment of 4m small cell sites by 2026 predicted back in 2020.  Those numbers do not now look realistic but encouraging signs from US carriers, particularly Verizon (VZ), who is building out its mmWave Ultra-Wideband network using small cell technology, recently noting that it had added 15,000 additional 5G mmWave small cells on line, putting it ahead of its annual goal.  Small cell equipment suppliers are Samsung (005930.KS), Huawei (pvt), NEC (6701.JP), ZTE (763.HK), Ericsson (ERIC), Nokia (NOK), Airspan (MIMO), Commscope (COMM), and Comba Telecom (2342.HK), and a variety of smaller suppliers and component producers.


[1] Siddique, Uzma, et al. “Wireless Backhauling of 5G Small Cells: Challenges and Solution Approaches.” IEEE Wireless Communications, vol. 22, no. 5, 2015, pp. 22–31., https://doi.org/10.1109/mwc.2015.7306534.
 

Streetlights are ubiquitous, with close to 30m in the US alone and an estimated ~325m across the globe, and while some have been converted to energy saving LEDs and an even smaller percentage have begun to include other services such as cameras for traffic or pedestrian control, they consume considerable energy, space and maintenance, while doing little other than providing a safer walking or driving corridor.  We have noted previously that 5G base stations or repeaters can be installed on such poles, giving carriers a less expensive way to deploy the higher base station count needed for 5G and giving municipalities a potential offset to the cost of powering and maintaining those poles.
Most modern light poles include a photocell sensor to automate the lighting which goes toward reducing cost, but despite the massive number of light poles and their concentration in populated areas, they remain low function devices.  What makes light poles a focus for additional services is the fact that they are all powered, giving add-ons the ability to use that power without the additional cost of running additional power to other external devices, as has been the case for video cameras and similar devices, but it seems one new company is interested in bundling lots of stuff into a relatively small package that is easily installed on existing light poles.
Ubicquia (pvt), a Florida-based start-up has bundled a variety of devices into a single package that attaches to existing streetlights in minutes, giving each the ability to provide Wi-Fi, Directional Microphones, Dual 4K Cameras with 16 days of video storage, and an 8 core AI processor, and a PoE (Power over Ethernet) port for additional applications.  The Wi-Fi 6 access point can be used to provide access to the public or city employees and can be meshed by using a backhaul connection, while the cameras can stream traffic and pedestrian images with the microphones used to gather noise levels, speeding cars, or gunshot noise through the company’s platform management system, which controls all functions and data.  As the platform itself installs through the light pole photocell input, the cost of installation relative to adding individual devices or a dedicated pole is said to be 40% lower (unconfirmed), with compatibility (again unconfirmed) with 360m streetlights.
While street poles have always been financial burdens to towns and cities, increasingly so as cameras become more a part of daily life, the need for carriers to deploy additional base stations for 5G and eventually for 6G give new life to street poles, and will allow governments to provide additional services , partially funded by carriers.  The cost of adding such services through modular systems such as the one described above make it worthwhile and cost effective for adding those services which can benefit the public in numerous ways, particularly by reducing traffic and preventing or solving crime.  While there will always be questions of personal security, light poles and cameras are already so enmeshed into society that unless they are used for quasi-legal purposes, they seem to be accepted by the general population, and as less of a cost burden local governments can expand their use without a heavy cost.

​Note: SCMR LLC is in no way associated, has investments in, or receives any compensation from companies mentioned herein, and while we might speak to management about the company or products, we make decisions about the content of our notes based on our desire to present informational and interesting topics and commentary on consumer electronics, companies, and products.

With over 1.7m 5G base stations across the Mainland, China is the leader in 5G on a unit volume basis, with 70% of the global total 5G base station count on the Chinese Mainland, according to the Chinese Ministry of Industry & Information Technology, and Beijing alone is said to have almost 52,000 5G base station, essentially 20.8 for every 10,000 residents.   Guangzhou (formerly Canton), one of the three largest cities in China and the most populous metropolitan area on the globe, has a 5G based bus rapid transit dispatch system and both a 5G based ‘smart’ railway station system and 5G internet service for consumers across eight stations on Line 18 of the Guangzhou rapid transit system, which travels at ~100 mph.
It can be assumed that given the size of Guangzhou  (~14m), a bit smaller than Beijing (~21m), there are ~35,000 5G base station across the city proper, helping to create a 5G network that covers much of the city.  That said, aside from companies that produce, install, or maintain that 5G equipment, there are some who wish to profit from the 5G expansion in Guangzhou, and one Wu Moumou, a 30 year old resident seems to have found a way to do this, albeit short-lived. In early July it was found that a local carrier was alerted to the fact that a base station in the Nansha district of Guangzhou has become damaged and coverage in that location had become ‘paralyzed’ (their words) according to the investigation.  When a team was sent to assess the problem it was discovered that the baseband processing modules were missing, causing the service shutdown.
Upon a police investigation it was discovered that two other cases of module theft had occurred nearby, with a total of a bit over $45,000 worth of equipment being stolen during the three incidents.  With further investigation it was found that Mr. Moumou was ‘familiar’ with all three sites and was arrested.  The eight most recent stolen modules were discovered but it was also found that most of the ~$890 he received for the stolen goods has already been spent on gambling and little was left.  The police indicated that public facility theft, particularly copper network cables was serious problem years ago but as those lines were upgraded to fiber thieves began looking for new targets and Mr. Moumou was able to relatively easily gain access to the information he needed to figure out what parts of the base stations were most valuable, although poor fencing and a gambling habit were his eventual downfall, along with a meager 2% return on his ‘investment’.  Since license plates are particularly hard to come by in China, Mr. Moumou should have focused on something a bit more profitable, although he might now be might be making the same plates he should have been appropriating.