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5G – The Confluence of Technology & Geopolitics

18 November 2019

Technology under the radar

Technological advance is typically a function of innovation, invention, capital, opportunity and relevance. Investors understand this well and have long experience of successfully investing in new technologies, changing direction as evidence of its development demands. In this case, however, we also have another, unquantifiable factor that brings significant distortion and inefficiency: geopolitics.

Experience indicates that new technologies are often misunderstood at the early stages, leading investors to underestimate the scope and cost of the new technology and overestimate the speed and ease of its adoption. Historically this has been borne out because almost every new technological advance has ultimately been taken advantage of in ways that were not accurately anticipated at the outset.

5G, or fifth-generation cellular technology, is similarly misunderstood today; its sheer scope and transformational power is wholly underestimated and that has led to the signals revealing threats and opportunities for investors to be blocked by the noise. This is a problem, because 5G will have a long-lasting and long-term indirect impact on investment returns. 5G trials have been held in several countries, notably in the PyeongChang 2018 Winter Olympic Games1.

The country currently in the lead in 5G development is China, driven by Beijing’s strategic imperative, with the Asia-Pacific region leading the way in 5G adoption. What is perhaps less clear is the extent to which China dominates these subscriber numbers. According to a variety of sources, the majority of the 54 million early adopters next year are in China.

Forecast of 5G smartphone subscriptions by region

Forecast as of November 2018. Source: Ericsson Mobility Report and Statista.

Why 5G matters

Equally importantly, the market is missing the extent to which this technology has become the critical terrain over which the escalating geopolitical struggle between the US and China is playing out.