Apple (NASDAQ:AAPL) won't have any 5G smartphones in its lineup until next year, but it's still expected to dominate the market when it does. That's despite the fact that rivals Samsung Electronics and Huawei beat it to the punch with 5G smartphones.
At least that's according to Strategy Analytics, the market research firm that predicted last week the iPhone maker will become a leader in 5G despite its late entry.
"It may seem counterintuitive that Apple, which currently has no 5G phones in its portfolio will be able to pass current 5G market leaders Samsung and Huawei," Ken Hyers, director at Strategy Analytics said in a press release. "But with three new 5G models coming next year, Apple merely needs to match its current upgrade rates for newly introduced iPhone models to take the lead."
With the smartphone market saturated and with consumers holding on to their phones longer, investors are setting their sights on 5G as the next bastion of growth. For good reason. Once 5G is available, consumers will be able to download quicker and access the internet at speeds never experienced before. It's predicted to boost network coverage and enhance security.
5G will also enable connected vehicles, smart cities, and a slew of Internet of Things (IoT) devices. To put it another way, it gives people a new and compelling reason to buy a smartphone. According to Gartner, 5G phones will account for 56% of the smartphones sold by 2023, up from 10% in 2020. In contrast, the market researcher forecasts worldwide shipments of PCs, tablets, and mobile phones will dip 3.7% this year.
U.S., China to drive 5G growth in the beginning
So what does Apple have that Samsung and Huawei don't that could prompt such a bullish call out of Strategy Analytics? More market share in the U.S. and improving share in China, which is a big thing.
"Currently Samsung is the undisputed market leader in 5G smartphones," said Ville-Petteri Ukonaho, associate director at Strategy Analytics in the same report. "But with the two largest 5G markets in 2020, China and the USA, dominated by Huawei and Apple respectively, these two vendors are set to lead in 5G next year." It doesn't hurt that Huawei is banned in the U.S. after landing on a White House blacklist. That removes a competitive threat to Apple in the U.S.
Apple is taking the 5G opportunity seriously. It's expected to roll out three iPhones that will run on Qualcomm's 5G modem chip. That was made possible this spring when the two settled a long-running legal dispute. All of the 5G devices are expected to have OLED screens.
Apple is reportedly aiming to sell 80 million 5G smartphones, which is in line with the 75 million to 80 million new iPhones it sells annually. In addition to potentially helping the company regain its smartphone dominance, the launch of 5G iPhones is expected to hasten the pace of network build-outs necessary to support 5G connections. China is leading in that effort, going live with its 5G network in October. In the U.S., the race is on to build 5G networks with the Federal Communications Commission adopting a series of initiatives to spur development. All major U.S. carriers are at different stages of building 5G networks.
Consumers ready and waiting for 5G
While there isn't much need for a 5G phone today, consumers appear interested in what it brings them in the future. In a recent survey of iPhone users, Piper Jaffray found 23% said they would spend $1,200 to upgrade to a 5G iPhone.
That's up from 18% of respondents expressing interest, according to an earlier Piper Jaffray survey this summer. Users could be holding out for 5G iPhones at the expense of the iPhone 11, however. The Wall Street investment firm found 51% of users planned to upgrade compared to 69% in 2018. Of the new iPhone 11 buyers, many are purchasing Apple's lowest-end model, which sells for $699.
Apple should get a good boost from 5G granted it rolls out 5G iPhones as anticipated, but whether it will become a leader depends on how its rivals fare. After all, Samsung is a formidable competitor in the U.S., and Huawei is on fire in China. If they are able to innovate faster than Apple on the 5G front or undercut it on pricing next year, Apple may not perform as Strategy Analytics expects, according to Hyers. He said that as more markets around the world move to 5G, Samsung will have the majority of the market share because of its global presence and variety of devices across different price points. .