The 5G cellular technology market makes a lot of headlines these days as telecoms like Verizon Wireless (NYSE:VZ) and AT&T (NYSE:T) make ongoing announcements about new markets that they've just launched 5G services in. Meanwhile, the number of 5G-capable smartphones that are available for consumers to buy is still staggeringly low, making all of the claims by carriers that they have the fastest and best-built network and the most 5G cities all moot points right now.
But these companies are likely angling for consumer attention now because an explosion of 5G devices is just around the corner. According to research firm Gartner, 5G-capable smartphones will go from just 10% of the market next year to an impressive 56% in 2023.
This is good news for wireless carriers, of course, as 5G offers them the opportunity to sell more expensive 5G connections for phones and Internet of Things (IoT) connectivity for wearables like smartwatches. But the expanding 5G phone market could also help device makers, including Apple (NASDAQ:AAPL), as users see a concrete reason to upgrade their phones.
5G offers a lot of opportunities for Apple and AT&T
Sure, Apple is moving away from relying on iPhone sales as its core moneymaker and is instead looking to its wearables and services segments as its future. But the company still relies on iPhone sales for 55% of its total revenue. So anything, including 5G, that could help provide a small boost to those sales would still be welcomed by the company.
5G could provide a new upgrade cycle for iPhone buyers because of the significance of the technology. 5G speeds will be up to 100 times faster than 4G, and connectivity speeds between devices and towers will be faster as well.
Apple hasn't announced whether it will launch a 5G iPhone next year (although it's rumored to be doing so), but once it does, the company will likely benefit in a big way. The installed base for 5G is devices, most of which will be smartphones, is expected to increase by 14-fold between 2020 and 2023. Additionally, research firm Strategy Analytics estimates that Apple will become the undisputed 5G phone leader once it launches a 5G iPhone because this will spur a massive upgrade cycle for Apple's phones.
5G will be so crucial for the smartphone market that Gartner says, "As a result of the impact of 5G, the smartphone market is expected to return to growth at 2.9% in 2020," up from a decline of 3.2% in 2019.
Wireless carriers will benefit from the 5G smartphone sales boost as well. AT&T's management recently said that it expects a compound annual growth rate of revenue growth between 1% and 2% over the next three years, in part because of increasing device sales.
Additionally, AT&T and other wireless carriers will benefit, since 5G provides faster and more reliable coverage for phones, wearables, and other IoT devices. That will allow the telecoms to sell more expensive monthly services to users, with worldwide revenue from 5G services reaching an estimated $619 billion by 2026.
The fact is that the installed base of 5G-capable devices -- phones and IoT tech -- is about to skyrocket. That's fantastic news for AT&T and its competitors as they look to new 5G services to generate more revenue and for Apple as it uses 5G to launch a new upgrade cycle for its iPhone.
All of this means that investors who've been skeptical about 5G need to look no further than how quickly consumers are about to adopt this technology to realize the potential.