How can 5G Accelerate the Internet of Things (IoT)?

Jan 18, 2019

5G, or fifth generation cellular communications technology, has become a hot topic across industries for its potential impact on emerging technologies, and specifically, the Internet of Things (IoT), which describes the development, manufacture and use of connected devices.

These devices range from small heart rate-monitors to autonomous vehicles, smart home appliances, intelligent factories, and much more. Together, such tools share the use of sensors, chips and processors to collect, transfer and analyze data, all the while interacting with other devices on a network.

While the number of connected devices worldwide has already begun to proliferate rapidly, the launch of 5G networks is expected to significantly accelerate consumer and enterprise adoption of IoT products and services.

In this blog post, we seek to define 5G, explore how it will develop over time, and illustrate its importance to the expected growth of the IoT market.

What is 5G?

5G is a set of emerging global telecommunications standards, generally using high-frequency spectrum, to offer network connectivity with reduced latency and greater speed and capacity relative to its predecessors, most recently 4G LTE (Long-Term Evolution).

Importantly, 5G describes a collection of standards and technologies used to build tomorrow’s cutting-edge network infrastructure. In fact, many of the standards that will be officially considered 5G are still being decided on by working groups like the 3GPP, a collaborative body made up of various telecommunications associations. The new standards are made possible by innovation across several technologies, including semiconductors, communications equipment like routers and antennas, and the sensors embedded in devices sitting on the edge of a network.

These emerging technologies leverage a few trends in networking, such as the use of radio frequencies above 6 GHz, to reach desired speeds and benefits. Many service providers across countries, however, are attempting to bring 5G to lower radio frequencies, such as those considered sub-6 GHz or in bands used in existing cellular standards. Such variability reflects the diversity of approaches to 5G, as well as some of the natural constraints of using higher frequency spectrum, like limited geographic range and susceptibility to interference.

To work around these challenges, many carriers are deploying small cells, or small cellular radios densely packed to achieve 5G coverage in a desired area. Many governments, including agencies like the U.S. Federal Communications Commission (FCC) have also yet to auction off high-frequency spectrum, which carriers will need to guarantee widespread coverage and speed.

4G vs. 5G across key metrics 1,2,3,4,5

5G, for instance, is expected to enhance network bandwidth to accommodate speeds 10-100x faster than either current cellular connections or in-home fiber optic and wireline services.  Reduced latency, or the lag between initial data transfer and network response, should also be a critical benefit of 5G, particularly for services that require near-real-time communication, such as autonomous vehicles coordinating movement along a highway. Added capacity from higher frequency spectrum is also expected to help service providers efficiently manage ever-growing customer demand for IoT use cases, including those as simple as high-speed HD-video downloads.

When will the 5G rollout begin?

Over the past few years several telecommunications companies, particularly those in East Asia, North America and Europe, have begun to develop and even pilot 5G networks in specific markets, usually cities. China, for instance, has already outspent the US by $24 billion since 2015 on 5G technology, deploying about 350,000 new cell sites relative to just 30,000 in the US.6

At the same time, businesses and trade associations have strived to agree on global standards for 5G. While 5G launches from carriers and smartphone providers are expected in 2019 and beyond, scaled adoption of 5G will likely begin several years from now. Network providers will need time to implement the new network infrastructure and density improvements necessary to support widespread 5G coverage.7,8,9

Beyond continued investment and technological innovation, government action and private sector cooperation will also be critical to 5G scalability. Governments will likely auction higher bandwidth spectrum to help facilitate the capacity improvements, and the finalization of global 5G standards should help guarantee network interoperability and improve operational efficiency.

Why IoT could be the major beneficiary of 5G?

A primary driver of 5G is not merely ever-growing consumer demand for faster internet but also the proliferation of connected devices in industrial settings, from agriculture to pharmaceuticals and automotive manufacturing. These industries increasingly rely on connected devices to gather and analyze data, make businesses processes more efficient, enhance productivity, and continuously improve products and services for customers.

5G is expected to help businesses more effectively manage the ever-increasing quantities of information produced by the Internet of Things, as well as improve the near-instantaneous communication necessary for mission critical services like robotics-assisted surgery or autonomous driving. Similarly, 5G networks are expected to offer flexibility to handle a range of connected devices, including those that don’t necessarily need real-time communication but still require periodic, low-power data transfer for years at a time.

To shed light on the many IoT-related activities 5G will help enable, we identify four key markets likely to be disrupted by our hyper-connected future:

  • Augmented and virtual reality (AR/VR): Increasing use of AR/VR technology heralds the creation of completely simulated digital environments, as well as the overlay of digital tools in everyday environments. Consumer gaming, industrial manufacturing, and medical services are just a few of the early use cases for which AR/VR is gaining traction. 5G is expected to be a critical enabler of reduced latency and enhanced speed that should make these bandwidth-heavy services possible.14
  • Autonomous vehicles and smart infrastructure: Autonomous vehicles, at their peak level of self-direction, are expected to require a level of IoT maturity powered by 5G. Indeed, to achieve real-time awareness and safety, autonomous vehicles need sufficient network speed and capacity, as well as near-instantaneous latency. And while the path to level 5 autonomy is still a work in progress, vehicle connectivity continues to reach all-time highs. In 2017, estimates suggest between 60 to 80% of cars sold globally contained installed telematics, and by 2020, 90% of new cars will have Internet-connectivity.15 Additionally, smart highways, grids, properties and other infrastructure investments would require sensor technology to support the development of not only autonomous vehicle ecosystems but also smart cities generally.
  • Healthcare: From wearables for physical health monitoring to high-tech diagnostic equipment, the evolution of sensor technology should offer the healthcare industry an unprecedented opportunity to generate actionable insights from patient data. Other types of connected medical equipment, such as mobile robots, surgical-assistants, and even exoskeletons may help improve both health services efficiency and patient outcomes. The medical robotics market alone is expected to reach $17 billion by 2023, up from $6.5 billion in 2018, for a compound annual growth rate (CAGR) of 21%.16
  • Low-power devices: Not all devices connected to 5G networks will require ultra-fast speeds; in fact, many low-power devices will instead rely on 5G for its increased capacity. From crop monitors gauging water levels in agricultural environments to power-management systems in residential properties, low-power devices are likely to be among the early yet frequently adopted use-cases for IoT.17

Accordingly, the three primary industries that we believe are likely to benefit from this rapidly emerging theme of the 5G-enabled Internet of Things include:

  • Connected Device Manufacturers: Creators of sensor-laden devices and appliances that make up the end-products ultimately used in IoT, like wearables and smart home device makers.
  • Network or Service Providers and Communications Equipment Manufacturers: IoT depends on fast, secure, and reliable networks to transmit information from sensors to data processors and control systems.
  • Semiconductor Manufacturers: IoT is expected to significantly increase demand for microcontrollers, sensors, WiFi and cellular chips, flash memory and high-performance processing units.

Related ETFs

SNSR: The Global X Internet of Things ETF enables investors to access a potential high growth theme through companies at the leading edge of IoT, an approach which transcends classic sector, industry and geographic regions to target this emerging theme. In a single trade, SNSR delivers access to dozens of companies with high exposure to emerging IoT technology.

Key terms for understanding 5G

  • Bandwidth: The amount of data or information transmitted per unit of time, such as MB/s or GB/s.
  • Hertz: A unit of frequency, in this case, 1 time-change per second.
  • Millimeter wave: Refers to higher frequency bandwidth, usually 30 GHz and above.
  • Latency: How quickly a network responds to a device request, generally measured in milliseconds.
  • Small cells: Small radios that can be placed anywhere in an urban environment, as opposed to a large cell tower, for instance. Generally, small cells are densely aggregated in a specific locality.
  • Carrier aggregation: Method to help service providers create connections with different frequency bands to reduce network congestion.
  • Network slicing: Method to help service providers accommodate the connection requirements of different devices. Autonomous vehicles, for example, require different connections from that of low-power devices.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice and is intended for educational purposes only.

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