​Private Mobile Networks are just like public mobile networks but they are not accessible to individuals unless you are part of the organization that owns them.  Inherently they would be smaller and in many cases company specific, but they have characteristics similar to large public mobile networks, without many of the regulatory issues and requirements that public networks are burdened with.  There are lots of potential investors in private mobile networks, and by that we mean potential customers that could build such networks for themselves or others. 
Industry organization GSA (Global Mobile Suppliers Association) has identified 626 organizations in 55 countries or territories where private network deployments (4G or 5G) have been made or licenses granted for same have been issued, including 71 network operators.  As part of the same database there have been 187 active private mobile network projects identified and at least 50 vendors who are providing equipment for such networks and projects, so we see the segment as one that not only has its own cost/return characteristics but is not growth limited by competition.

​In most cases such private mobile networks are local, meaning single sites or campus locations, with 33% of those identified and an additional 21% assumed to be LANS, while city-wide or National private networks make up ~13% (33% unidentified), which is not surprising as these are in many cases, specific use networks, meaning attached to a particular company or type of organization, but when viewing the breakdown of industry segments (Fig. 2) that are deploying private mobile networks, there are some such as rail or O&G that would be candidates for WAN networks to maintain control over assets that are widely dispersed.  LTE (4G) is still the most common private mobile network technology but while we expect the share of WAN networks to remain relatively constant, we expect the share of 5G networks to continue to grow as new deployments would likely be 5G based or a combination of both.

Manufacturing is by far the sector with the most private network deployments, and factory or campus networks that allow personnel, autonomous vehicles, or stationary devices to utilize location data, IoT, and individual communications networks that are factory bound, are relatively commonplace, but there are many other industry sectors that have need, either for security reasons or for logistics, that need to be ensured that they will be able to communicate with critical infrastructure, be it local or otherwise.  Some can be critical, such as mining, where local nodes are in flux as locations change, or logistics, where a waste number of assets must be tracked, while others less so, such as government networks, which can be used for specialized announcements or notifications for a select group of members or constituents. 
Breaking down the manufacturing segment further, the automotive sector has been a strong proponent of private mobile networks, given what can be a vast facility such as the Volkswagen (VOW.GR) plant in Wolfsburg, Germany, that covers 6.5 square miles (3x the size of Monoco) and has ~60,000 employees (48% of the entire population of Wolfsburg), or the Hyundai (005380.KS) Motor plant in Ulsan, South Korea that covers ~5 square miles, employs ~34,000, and has its own fire station, hospital, sewage treatment plant, and roads.  However we see few limitations and progressively more opportunities for same as data networks evolve and the need to build out concurrent mobile networks increases proportionally.  Collecting lots of data is a good thing but the objective is to use that data to make meaningful improvements in operations.  Those improvements are made by management, engineers, and line works who must be informed as to how those changes are being manifested, and getting all interested parties in one place for a meeting can be quite difficult.  Getting information to the proper parties makes private mobile networks an obvious option.

​There are only a few places where data on Chinese smartphones is available, and fewer where the data is consistent and reliable, so we are always a bit hesitant when quoting statistics from unnamed or even named state organizations.  That said, the China Academy of Information & Communication, a well-known think tank that operates under the Ministry of Industry & Information Technology, the state-run organization that is responsible for regulating and developing almost anything involving communication, has been unusually consistent with both monthly smartphone unit volumes, and an occasional look into more detailed Chinese smartphone statistics.
A recent blurb from CAIC indicated how certain smartphone characteristics were broken down between 4G and 5G smartphone in 2Q, and while the data is certainly pointed toward presenting China’s 5G model in its best light, we were able to make some comparisons on a global rather than a regional basis to see how different the global metrics were from the CAICT data.
While 5” smartphones are not uncommon globally, looking at the 10 most popular smartphones on a global basis this year, we note that all are above 6.4” and as large as 6.78” (display size), so while China boasts that 76.9% of all smartphones shipped in 2Q were greater than 5” and 100% of all 5G smartphones were greater than 5”, we would have been more interested in 4G/5G smartphones 6” or greater, as the data would indicate more information about current consumer tastes, and when comparing the Chinese data to global data, 23.1% of all Chinese smartphones shipped in 2Q were under 5”, while only 7% of all global smartphones shipped were under 5”.  Looking at the global list of most popular smartphones, we were unable to find any smartphone (4G or 5G) under 5” within the top 70 most popular phones.
In the same way the Chinese data indicated that 74.4% of all smartphones shipped in 2Q had a resolution of 720 (HD) or better, while the global data indicated that 92.5% of all smartphones shipped globally were at least 720, although it seems that 5G smartphones in China are almost all (97.8%) 720p or greater while only 46.8% were 720 or greater on a global basis.  It is hard to reconcile that such a small number of global 5G smartphones would have 720 or greater resolution we are more suspect of the global data than the Chinese data in this case, as we expect few 5G smartphones would add much value to consumers at resolutions lower than 720.
Cameras are still a big deal to many smartphone buyers, although we wonder how many can actually tell the difference between an image taken with a 25MP camera and one taken on a 50MP camera, but according to the CAICT data all 5G smartphones shipped in China in 2Q had at least a 50MP main cameras, while on a global basis the data shows that only 42.6% of main smartphone cameras were at least 50MP.  Further, the CAICT data showed also that 100% of all 5G smartphones with selfie cameras had at least a 13MP selfie camera, while the global data showed that only 37.4% of 5G smartphones met the same criteria.  In this case we can see the possibility of inexpensive 5G smartphones that are more oriented toward high-speed data and voice than the necessity to take high quality photos, but again it remains hard to reconcile much of the Chinese and global data, but anyone who works with data, particularly big data, can tell you that how you present the data has as much to do with how it is perceived than the data itself, sort of the glass half full/half empty debate…

Despite shortages, plant closings, and higher prices for most CE products, 5G smartphones continue to grow with device count growth remaining above the trend line since April.  Of the three primary indicators we look at, only one, the number of new form factors, did not increase in August.  We see that of little concern given that number, which represents new potential CE devices that have yet to be ‘5G enabled’, has been steady at 22 since March and already includes smartphones, indoor & outdoor CPE devices, 5G modules, routers, gateways, laptops, hotspots, tablets, in-vehicle routers, USB modems, and a number of specialty 5G devices, such as robots, TVs, cameras, repeaters, vehicle OBUs, and a vending machine, so it is becoming a bit harder to increment that number, although it is still up 22.2% y/y.
More importantly the number of 5G vendors increased by 7.7% in August (65.6% y/y) and the number of devices grew by 5.7% (+147.1% y/y) and all categories (other than ‘Form Factors’) saw both m/m and y/y growth.  While the charts paint the picture, we put August 5G growth, y/y growth, and two-year growth in the table below for clarity.  We note that there were no 5G tablets available in 2019.

With the release of the iPhone 13 still scheduled for October, we expect 5G smartphone shipments to see substantial increases in the 4th quarter.  Last year, despite the October 2020 release, the iPhone 12 accounted for ~24% of 5G smartphones last year, and while the 5G smartphone market is a bit more diverse this year, both the iPhone 12 and the upcoming iPhone 13 are expected to account for ~1/3 of all 5G smartphone shipments this year.

At the end of June, a Swedish court upheld a ban established by Sweden’s Post & Telecom Authority that was put in place last year against both Huawei (pvt) and ZTE (000063.CH).  This was the 2nd appeal made by Huawei after losing its 1st appeal late last year.  While Huawei has always competed with Sweden’s own 5G supplier Ericsson (ERIC), the ban, which was not supported by Ericsson, has had an effect on Ericsson’s prospects for selling 5G equipment in China, the globe’s largest 5G market.  It seems that China has decided that it will be buying less 5G equipment from Ericsson, now that the Swedish government has reinforced the ban, and Ericsson has indicated that it will be closing one of its R&D centers in Nanjing, offering to transfer all employees to another Swedish firm who has offices in Nanjing.  Roughly 600 employees are involved.
Ericsson will still have 4 other R&D centers in China and is expected to hold a 23% share of the global 5G equipment market this year (down from 26% last year) but saw a big drop in its Chinese business in 2Q and noted in July that it was no longer counting on a number of 5G tenders that it had expected to win before the tension between the two countries escalated.  While the company’s president and CEO still believes it can generate business in China, it will likely be facing far greater nationalistic challenges than last year.  According to Trendforce, the global mobile base station market will look like this at the end of this year.

CTIA is a trade association so we point out that they might have a slight bias toward affording the wireless industry a bit of slack when it comes to marketing, but by and large their data corresponds with much other information on 5G that we gather.  The CTIA puts out an annual survey that tallies various segments of the wireless space, with this year’s survey highlights focused on the ‘5G Economy’ in the US.
Fig. 3 indicates the rising investment made by US carriers in 5G infrastructure, which has totaled $138.4b since 2016.  The CTIA adds that such investments have created ~4.5m jobs and generated $1.5t in GDP growth during that period, although we have seen other data that is said to reflect both job growth and GDP contribution from 5G, and believe some poetic license has been taken in considering what is included in those numbers, not only by CTIA but by other wireless trade organizations also.  While the US population is ~4.3% of the global total, the US investment indicated above represents 18% of the world’s total mobile investments according to CTIA, but to qualify, that is for all wireless, not just 5G.

Cell sites are the heart of the wireless network in the US and the number of sites has grown rapidly (64.85% over the last ten years, but not as much for 5G as for Federal reforms that eased restrictions on small cell deployments, which the FCC believes would allow faster deployment of 5G.  The theory that the deployment of such small cell sites (the size of a backpack according to the FCC) were being hampered by outmoded rules relating to the large tower installations that were used for 3G and 4G.  By ‘innovating’ the rules, such small cell sites could be fast tracked, and led to the increase in cell sites in 2019 -2020. 
5G was mentioned often in the discussion surrounding those changes with the caveat that not changing the rules would place an obstacle in the way of the US leadership in 5G, which stretched the truth a bit, as most early 5G sites were just additions to 4G sites, and the 5G signal path used that same 4G network.  Once again the political battle between the US and China had much to do with the legislation, as the US fought against the rapid 5G deployments on the Mainland.  That said, given the distance limitations that 5G networks face, it will be quite important to keep 5G cell site restrictions to a minimum or the technology will face limited coverage, but expecting the sites to be almost invisible is a bit far-fetched as there will be far more of them, although ‘microcells’ hanging on street lamps or on top of telephone poles, despite their number, will be far less obtrusive than the massive 4G towers that seem to pop up on every hill.

​Where we have a problem is CTIA’s coverage maps that compares US coverage two years after initial technology deployment.  The 4G map indicates that coverage was very spotty, particularly across rural America, while 5G covers a vast amount of the continental US and much of Hawaii.   Coverage maps however tend to be based on what is theoretically possible rather than what is actually available and just a quick check on carrier sites of ‘5G availability in your neighborhood’ proves the point that states like New York, that look to be almost completely covered, have to be looked at on a subscriber level, rather than on the macro-level that the maps depict.  Here in Westchester, New York the wide area map indicates that 5G availability covers the entire county but sites like speedtest break down the coverage even further showing where actual 5G sites are located.  Taking it even one step further, carriers have their own pages where you can put in a street address to find out if 5G is available to your home, and those results are far different than even the granular speedtest maps.  In fact we have been unable to find an address in our town that has 5G availability, despite the coverage maps, which we expect will be the case in many other locations

​All in, the CTIA survey was just a reinforcement of what we had seen before, but it validated much of the previous data.  Unfortunately, and this is the case with almost all data we see surrounding 5G, the vested interests of many parties are attached to that data and tend to paint a picture that looks real but does not truly represent reality.  5G is growing and at a more rapid pace than previous wireless deployments, but while carriers spend and calculate the return path of those investments, users see a completely different picture when they wish to apply the technology, even for such simplistic tasks as sending a short video to a friend.  It’s the real world that counts.

While looking at data for only the Android smartphone market is a bit narrow considering that iOS is typically between 26% and 28% of the totals market, but data is data, and data on 5G smartphones can be a bit difficult to come by.  That said, the data for Android OS 5G smartphones has confirmed what it seems Samsung Electronics (005930.KS) already knows, that it was not the leader in selling 5G smartphones in 2Q.  Samsung’s share of the Android Smartphone market fell to 15.2% from 16.5% last year, and while the company certainly sold more 5G smartphones this year, against last year’s COVID-19 depressed 2Q, it seems others sold more.
In last year’s 2Q, the Android 5G smartphone leader was Huawei (pvt), with a 47.5% share, with Samsung in 2nd place, however this year, because of the severe trade restrictions placed on Huawei, the share of the former leader has fallen to a mere 3.3%, with other Chinese brands fighting to pick up Huawei’s lost customers.    Chinese brand Xiaomi (1810.HK) seems to have been the most successful, shipping over 24.3m 5G Android smartphones in 2Q, bringing its share up from 9.7% last year to 25.7% this year and taking over 1st place.  In 2nd and 3rd places were Chinese brands Vivo (pvt) and Oppo (pvt), who saw their share increase from 12.1% to 18.5% and from 11.2% to 17.9%.
Across the Android 5G smartphone market, all major players except Huawei and ZTE (000063.CH) another trade sanctioned Chinese smartphone brand, saw share increases, with the total market seeing 107.8% unit growth, again, against a very weak 2Q 2020, according to our aggregated data..  It is hard to tell whether Samsung’s share loss in a category that it pioneered, was jingoistic (love that word) in nature, but that was likely a good part of the share loss, but, as we have mentioned in recent notes, Samsung’s mobile division is currently under an extended audit by a senior level team that will ultimately answer to the about-to-be-released Vice Chairman of Samsung, who has been serving time in prison for a bribery conviction.  We expect current division management will have to do some planning on how to avoid a similar situation over the next few months or face the wrath of Lee.

Despite shortages seen in many parts of the CE space, 5G components, at least chipsets for smartphones and other 5G devices, do not seem to have been seriously affected thus far, and continue the trend toward an expanding ecosystem.  July saw the addition of 12 new 5G vendors bringing the total to 143, up from 91 in July 2020, with the number of 5G smartphones also climbing from 431 to 450 during the month versus 162 a year ago.  CPE (Customer Premise Equipment) also grew from 158 to 171 offerings versus 94 at this time last year.
The trend line would indicate that 5G phone offerings would hit 500 by the end of the year, but with that number already at 450 and the holiday season upcoming, we expect that number is low.  Since seasonality data is not relevant considering that 5G data only became available in 2Q 2019, we don’t have a long-term basis for making a forecast for the remainder of the year, but even using a simple average of the monthly 5G smartphone offerings ROC for the last three months would imply a year end number of smartphone offerings of 580. 
While 5G for smartphones has been the focus for most applications, in order for 5G to become widespread, there need to be other devices and applications for those devices to make the technology more ubiquitous. Fig. 4 shows how the share of each application has changed as a percentage of the total, and while smartphones have declined slightly, they still represent 48% of all 5G announced devices.  The data is Fig. 5 however shows the overall growth in announced devices with the data table below indicating the number of units in each category.  Some devices, such as 5G laptops/notebooks have seen very significant growth, albeit with a small number of units, with all categories other than FWA/CPE growing faster than smartphones (see table below).  As there were no in-vehicle 5G applications at the end of last year, that growth rate has been omitted.
All in 5G is growing but aside from the replacement cycle for 4G smartphones, applications that truly benefit from 5G are a real driving force for pushing the technology forward.  IoT applications, particularly mechanical performance data, would certainly benefit from 5G, but would do little to promote the technology where consumers would see its value.  With much of consumer facing 5G promotion oriented toward downloading video or gaming, we see a real market application a bit further out.
 When a multitude of streaming devices for TV are able to access and utilize 5G, meaning when it is available to the consumer, and streaming devices are able to capture a 5G signal either through their own antennae or through a 5G internal Wi-Fi network, we expect a rapid jump in 5G recognition.  This is not a simple task and while some streaming devices can already accept a 5G signal, most Wi-Fi set-ups do not, nor is the service available in many locations.  The bandwidth available in 5G however will give streaming services a shot at removing the buffering and traffic congestion that plagues users.  Downloading a movie to watch in a car is one thing, but not having episode 5 of ‘Loki’ interrupted every 10 minutes would justify 5G for us.

​While 5G gets the headlines, we have previously noted that LTE (4G) continues to grow, hitting almost 6.2b subscribers by the end of 1Q, showing 10.4% y/y growth, and adding 584m subscribers in the previous 12 months..  LTE subscriptions now account for 63.8% of all global mobile subscriptions, according to the GSMA, with the Asia-Pacific region accounting for 66.8% of those subscriptions.  According to the same data source, 5G subscriptions grew by 36% in 1Q of this year, reaching 298.4m subscribers globally, or just a bit over 3% of the total mobile market.  That said, that number has changed drastically, as a supplier of the 5G China subscription data has revised their year-end China 5G subscriptions from 401m to 219.5m, an almost 55% reduction, based on receiving ‘new information’ concerning 2020 5G subscriptions on the Mainland, the details of which were not revealed.
As we noted last week, there are discrepancies in the data provided by state sources in China, which call into question whether the data has been ‘colored’ by state objectives, and the subscription data mentioned above fuels that fire, and calls into question other data, such as the number of Chinese base stations deployed or the 5G coverage maps on the Mainland.  While there is no way to drill down through the state data, as the carriers in China that provide the data are also state run, we have to take the numbers at face value, but with the same wariness of self-aggrandizement that we see in the display space.  Words like ‘expect to’ or ‘according to market demand’ don’t always translate exactly or can be missing from press releases, which can lead to assumptions concerning 5G that are a bit more dubious than originally expected.  It is interesting that ‘glorious’ or ‘industry leading’ always seem to be translated correctly however.

While 5G data is relatively easy to come by in China, likely because China is the 5G leader and wants the world to know, it is much more difficult to derive such data for the rest of the world.  Much comes from the fact that 5G deployments vary considerably from country to country which means there is almost no 5G subscriber data for many areas and little 5G smartphone shipment data from those regions.  That said, 5G smartphone shipments do not always link to subscriber growth as some customers upgrading or replacing a 4G/3G smartphone might move to 5G in anticipation of deployment in their area or country.  Under that premise, we are just beginning to see data that helps to understand why smartphone brands are so interested in selling the idea of 5G to customers, aside from the fact that the smartphone market is saturated smartphone market in many developed regions.
Early data for 2021 suggests that global 5G smartphone shipments represented 39% of total smartphone shipments in 1Q of this year, or ~138m units, and before we go further we note that based on our China shipment data, that 39% is far below the 71% share that 5G represents of China’s total smartphone shipments.  That has been the case since the data became meaningful in 4Q 2019.  Chinese consumers have embraced 5G far more aggressively that global consumers, likely because China has made a concerted effort to deploy large numbers of 5G base stations across the country, or at least in populated areas, and continues to deploy at a rapid rate.  According to the Vice Minister of the Ministry of Industry & Information Technology, China has installed over 910,000 base stations across the country, accounting for ~70% of the global total.
Unfortunately, as we parse the historic data there are some glaring inconsistencies.  If we look at 5G shipment data for 2Q 2020, the global general consensus seems to be ~29m units, or roughly 11% of the total smartphones shipped that quarter.  However data from China says that in the 2nd quarter of 2020 China shipped 49.5m 5G smartphones, or ~164% of the global total, which implies that either the global totals are incorrect, or the Chinese data is inflated.  Almost all of the data on the Chinese smartphone industry comes from CAICT, the China Academy of Information & Communication Technology, which, in its own words, is a scientific research institute directly under the Ministry of Industry and Information Technology, which is an agency of the State Council, also known as the Central People’s Government, which presides over all of the countries provincial governments., alongside the Chinese Communist Party, and the People’s Liberation Army. 
This makes CAICT a direct organ of the state government and likely has its releases and data carefully scrutinized by various state and party officials.  While the data is at least consistent month to month in most cases, we would expect if there were any discrepancies, they would have been during the 1st half of last year when COVID-19 was at its peak in China, yet it seems that Chinese citizens, at least according to the data, were flocking to stores or on-line to purchase 5G smartphones.  As specifics as to how the Chinese data is collected and what it contains, we might assume that the Chinese data includes every 5G smartphone ‘produced’ in China, whether it was sold on the Mainland or not, but data from other periods is more consistent with global numbers, so we can only accept the data as it stands but take it with a large grain of salt.

Looking at just the global data, which we derive from a number of sources, 5G smartphone shipments, both from a sales standpoint and a share of the smartphone market, have been improving, with a noticeable jump in 4Q of last year when Apple (AAPL) released the iPhone 12 series, all of which were 5G enabled.  While the iPhone 12 series had a large impact on 5G smartphone shipments, it also had an unusual impact on the share of revenue generated from 5G sales, which had been tracking roughly 8% to 13% higher than the shipment share until the iPhone 12 release.  As can be seen in Fig. 3, the share of revenue from 5G sales, as a percentage of total smartphone sales, jumped from 28% in 3Q 2020 to 62% in 4Q and continued to climb in 1Q of this year.

Some of that increase also came from increasing shipment share of 5G smartphone from other vendors, with the 4Q holiday season as a stimulus, but the continued share of revenue expansion into 1Q seems to indicate that Apple was much of the source.  If we look more specifically at the main 5G smartphone brands, it becomes even more obvious that the release of the iPhone 12 series was the impactful event that boosted 5G revenue share across the industry, but when comparing 5G shipment share and revenue share in 1Q ’21 only Apple and Samsung (005930.KS) saw share of revenue higher than share of shipments, and Samsung by only a small amount.  Apple stood out in 1Q as owning 53% of 5G revenue with only a 34% share of shipments.  The data contained in Fig. 4 & Fig. 5 is summarized in the table below.
We would expect 2Q data to be similar, but while Apple could maintain a revenue share over 50% in 2Q, as new models from other brands are released, Apple’s shipment share will decrease until the iPhone 13 is released in October.  We expect the revenue impact to be a bit more muted this year as some Apple users migrated to 5G last year, but we expect the release will still be impactful.  If Apple pulls in the release date a bit to compete with Samsung’s potential updated foldable line, the 3Q boost could be closer to what was seen last year, with the understanding that last year was both an anomaly from the standpoint of the growth limitations that COVID-19 put on 5G growth, and as the first full year of meaningful 5G smartphone shipments and sales.  While this year will still see the impact of COVID-19 on the smartphone market, perhaps more through component shortages than physical limitations, and 5G smartphone offerings have proliferated considerably from last year, 5G smartphone shipments and sales will see more subdued q/q growth and less of an impact from individual brands.

In June the number of 5G devices grew 7.6% m/m and 175.4% y/y and continues to remain above trend line, as it has for the previous three months.  5G device growth rose 7.6% m/m in June and continues at ~7.7% m/m on average this year, while 5G smartphone growth was 3.6% m/m and 219% y/y, under the 2021 monthly average of 7.6%.  While Chinese smartphone growth has slowed, which might influence overall 5G smartphone unit growth, the summer months are typically slow growth months, with September, back-to-school being the beginning of the holiday season and the period when the most new models are released.
Areas of most growth were both routers (↑17.8% m/m) and CPE (Customer Premise Equipment) (↑9.7% m/m) as FWA (Fixed Wireless Access) becomes more commonplace.  According to data concerning the 20 most popular smartphones released this year, 11 are able to receive 5G signals, but only one of the 11 was able to use mmWave frequency bands, which is an indication to us that despite the US auctions concerning mmWave spectrum, mobile deployment has been slow due to the technology’s short range and potential for signal blockage.  Verizon (VZ) has been the US leader in mmWave and has the fastest mmWave download speed of any major carrier in the US according to OpenSignal, announcing in April that it is adding mmWave 5G service to ‘parts of’ New Orleans, Fresno & Riverside CA, and San Antonio.  Under the assumption that Apple (AAPL) sticks with mmWave on the iPhone 13 out later this year, we expect mmWave sites to continue to increase under all three major carriers, however at a far slower rate than sub6 given its slower speed but wider coverage.
As a side note, while 5G is just beginning to become a global technology, there are some in the communication industry that are already focusing on 5G’s ‘limited bandwidth’ when referring to IoT or other data sources that are expected to continue to expand rapidly over the next decade.  To that end, the road to 6G is starting to be planned, encompassing networks where mmWave spectrum is the low-end of the new spectrum range and what is now typical cell structure (Phased Arrays) becomes IRS (Intelligent Reflective Surfaces), which are theoretically simple and require less power to operate than phased arrays.
That said, there are a number of very significant challenges that would have to be met before such a network system would be possible and other potential systems are also be researched, some that use CF MaMi (Cell-free Massive MIMO) access points that are distributed over an area and create a vast coverage network that eliminates the need for cell coverage and has no dead zones.  Some are focused on much higher frequencies, up to 1+ THz., which offer much higher speeds than 5G but would require special components that have very stringent requirements that have yet to be designed, so despite the increasing number of papers on the subject of 6G, we are still many years away from implementation and still have a long way to go with 5G, which presents its own problems that are still being worked on.