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Global 5G roll-out could be hampered by chip shortage

Image credit: reuters

Connections to 5G networks worldwide remain on track to triple this year to 637 million, but continuing microchip shortages could dampen progress in the coming months, according to analyst firm CCS Insight.

Telecom operators in Western Europe, North America, China and other advanced markets in Asia have continued to roll out 5G networks, overcoming difficulties posed by the Covid-19 pandemic, uncertainties about the role of Huawei, and an unstable economic climate.

However, concerns about the supply of high-end devices towards the end of 2021, including the latest iPhone, poses a risk, albeit temporary, to broader adoption of 5G, the analysis found.

A combination of factors including disruption caused by the Covid-19 pandemic and rising demand have led to global chip shortages that have hampered the availability of some devices and made other more expensive.

For example, the latest games consoles from Microsoft and Sony are still hard to find nearly a year after their release and automakers have had to scale back production on their high-end vehicles. But even the Raspberry Pi, a much lower-powered device that uses older technology, saw its first ever price rise today amid the ongoing shortages.

Nevertheless, 5G networks continue to expand, and in South Korea, the world leader for 5G, it is expected that 30 per cent of mobile connections will be using the new networks by the end of 2021.

Even in the US, around 25 per cent penetration is expected before Christmas. While China was an early trailblazer for 5G, shaky demand for smartphones in 2021 means that 5G is forecast to account for only 24 per cent of cellular device connections by the end of the year.

In contrast, Western Europe is still lagging behind, limited by delayed spectrum auctions in some countries, slow government decision-making about the role of Huawei, and weakened demand for mobile phones amid the pandemic. Although the speed of 5G roll-out is improving, this relatively gradual start means that 5G won’t account for more than half of cellular device connections in the region until 2024.

Once the spectrum is allocated and telecom operators start deploying 5G networks, how quickly people adopt 5G depends on their willingness to buy 5G-capable devices, the CCS analysis found.

“In another turbulent year for the mobile phone market, supply constraints in low- to mid-tier segments, paired with weak demand in emerging markets, have dampened sales. But 5G-enabled devices have so far continued to find their way to the hands of people in the world’s most advanced markets, with 560 million 5G-capable smartphones projected to sell in 2021”, said Marina Koytcheva, vice president of forecasting at CCS Insight.

“The global mobile phone market is projected to recover in 2022, and prices of 5G handsets continue to fall steadily. Our forecast for 3.6 billion 5G connections worldwide by 2025 is still firmly on track.”

CCS also found that adoption of 5G for industrial applications was seeing positive momentum in growing markets like China.

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