The semiconductor industry has seen its ups and down, and it looks like 2019 was a down year. But the rollout of 5G telecommunication networks around the world is making analysts optimistic that semiconductor sales will have a healthy rebound in 2020.
Will 5G Help the Semiconductor Market Recover in 2020?
2019 ends on a down note for the semiconductor industry, according to the industry trade group WSTS.
Worldwide semiconductor sales fell to $409 billion in 2019; that’s down by 12.8% over 2018. Memory device sales, especially DRAM and NAND flash memory, dropped the most (down 33% from the previous year), followed by analog (down 7.9%), and logic devices (down 4.3%).
The same industry experts see a reversal of fortune in 2020 — thanks to the rollout of 5G telecommunications networks around the world.
Global semiconductor sales are expected to grow by 5.9% in 2020, led by a resurgent demand for optical and logic devices.
Five Predictions for the 5G Rollout in 2020 and Beyond
Each new generation of wireless networks has helped drive demand for semiconductor products — for inspiration, we just have to look back to 2009 (when the current 4G network rolled out).
But there are some critical differences with this, the fifth generation. We take a look at five ways 5G may be different in 2020 and beyond.
1. Whose 5G Ecosystem is It Anyway?
For the first time, we’re at the cusp of a major split in the worldwide market for mobile communications networks. The US government acted first, forbidding US companies from doing business with China’s ZTE and later Huawei (and Hisilicon, Huawei’s semiconductor company). The Chinese government has retaliated, banning government purchases of US computers, software, and telecom infrastructure products.
The bottom line? San Diego-based Qualcomm, a world leader in 5G handset chip design, may eventually face a reduced world market share if it stays cut off from the world’s largest market for mobile phones — China. Huawei, and other Chinese tech giants (such as Alibaba) have vowed to use “non-USA DNA” chipsets and operating systems, which may put a dent in ARM and Intel-based chip sales, create a new competitor to the world’s most popular phone operating system, Google’s Android, and leave an $11 billion crater in the pocket of American tech companies.
2. Who Will Manufacture the Chips and Network Infrastructure for 5G?
Who will benefit the most from the American vs. Chinese trade dispute?
Some speculate the answer is the Taiwanese semiconductor industry, which may end up producing both “American” and “de-Americanized” semiconductor products.
(Huawei recently edged out Apple as the biggest customer of Taiwan Semiconductor Manufacturing Corporation.)
Other companies, such as Nokia and Ericsson, may also benefit from a 5G ecosystem split, as countries (such as Mexico, Germany, and the UK) weigh the risks of angering Washington by deploying 5G networks based on kit from Huawei.
Thanks to the 5G rollout, demand for Field-Programmable Gate Arrays (FPGAs) should grow – helping both Intel and Xilinx. Also in demand: Ethernet switches and networking equipment (including virtual networking solutions, known as NFV for Network Functions Visualization), which should boost sales from Intel (again) as well as Cisco Systems, Juniper Networks, and Broadcom.
3. The Rollout Strategy for 5G Networks in the USA in 2020
Here in the US, the rollout of 5G telecommunications equipment began in 2019, and it will ramp up into 2020. (This puts us toward the trailing edge of technology, with China and parts of Europe further advanced.)
This time, US-based MNOs (Mobile Network Operators) are desperate to figure out how to leverage their 5G investment, having felt burned by the 4G rollout, which enabled technology platforms, from Amazon to Google, to accrue billions of dollars in stock valuations, while they were the ones who paid for the network.
Vowing never to repeat this mistake, the telcos are looking at some of 5G’s advanced features to identify new ways to slice and dice the network capabilities in order to increase their stock evaluations — and profits. (This wouldn’t have been possible under network neutrality rules, hence the huge lobbying efforts in DC.)
But at the outset, analysts believe the initial rollout will be slow and steady — to conserve cash. Fortunately, according to Deloitte, MNOs did themselves a big favor during the most recent 4.5G investments — much of the fiber and radio gear they installed earlier is 5G ready.
Indeed many in-the-know customers may find their “5G” phone is really connecting to a late model (call it 4.5G) LTE network, which, while pretty fast, does not offer the truly blistering 5G speeds promised in the promotional materials.
The greatest initial 5G sales push in the US will be for business and consumer FWAs (fixed wireless access devices) — a device with an antenna mounted on the outside of a building to bring 5G connectivity inside. (Of the three 5G spectrum bands, the so-called Millimeter-wave (mmWave) band cannot easily penetrate exterior walls.)
4. Basestation Challenges and Opportunities that are Unique to 5G Networks
5G has many advantages for MNOs. For example, 5G transmitters save energy, requiring as little as 1/1000 of the power needed per byte compared to earlier standards. 5G can also transmit data faster, and they offer a much higher capacity for the same bandwidth, helping to drive down the “Megahertz pops” — an industry cost metric that refers to the spectrum license cost of one megahertz of bandwidth passing over one person in the coverage area in a spectrum license.
But the three different bands of spectrum used in 5G make things massively more complicated. Take a simple example, a consumer or business antenna mounted on a building used to connect to the 5G network. Engineers have to design this antenna to pick up Low (sub-1 GHz, such as 700 MHz), Mid (1-6 GHz such a around 3.5-3.8 GHz), and Millimeter-wave (mmWave, such as 28 Ghz) signals.
5G basestations (e.g. the gear connected to cel phone towers) are more complicated as well. To avoid deadspots, multiple transmission towers are used to create a Small Cell Network. Inside, some use Monolithic Microwave Integrated Circuits (MMIC) to speed up data transmission.
To get the highest capacity, some basestations employ what’s known as MIMO (Multiple Input Multiple Output) technology, which streams the data through multiple transmitting and receiving antennas. The extreme case is a Massive MIMO, which can employ several hundred of these antennas simultaneously (compared to a max of 8 in LTE networks).
But wait, there’s more. These antenna signals can’t cross one another (especially at the higher mmWave bandwidths) without degrading the signal. A new “beamforming” technology points each of the data stream signals toward its intended target, creating a more stable signal beam.
Companies that should benefit from the demand for the new RF chips and 5G basestations include Infineon Technologies, Marvell Technology, Intel, Texas Instruments, Skyworks, and NXP Semiconductors.
And telecommunications companies are trying to figure out how to leverage the new basestation technology. Could it provide them a way to monetize edge computing, and help them displace their cloud-based competitors, such as Amazon, Google, and Microsoft?
5. IoT and Ultra-Reliable Low Latency Communications (URLLC)
Much of the justification for investing in 5G technology is based on the expectation that we’ll be using far more mobile data in the coming decade that we do today.
5G networks are expected to be a key enabling technology for the coming IoT revolution — they promise greater capacity to handle the massive amounts of data these devices consume.
For example, the next-generation of manufacturing, dubbed Industry 4.0, is expected to deploy embedded sensors, not only machine tools used in production, but in business and consumer devices as well — to monitor (and perhaps monetize) the products we use every day.
Other IoT devices will have different requirements: instead of high data capacity, they will require the highest levels of reliability (connectivity) and very fast reaction times (low latency).
The 5G specification should be able to deliver these capabilities, collectively known as Ultra-Reliable Low Latency Communications (URLLC), by the mid to late 2020s.
In turn, URLLC will be one of the enabling technologies that will make autonomous driving cars more secure, by allowing them to instantaneously communicate with other vehicles, for example. It will also do the same for highly delicate remote control operations, such as remote surgery applications where the doctor is using a haptic touch device to “operate” on a patient located hundreds (or thousands) of miles away — or for a Bomb Squad team to perform the delicate steps necessary to defuse an explosive device, again potentially miles away.
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