Understand the latest development trends of the 5G terminal industry in one article

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Since the Ministry of Industry and Information Technology issued 5G commercial licenses, my country's 5G commercialization has been promoted for a full year. Under the orderly promotion and deployment of my country's 5G "new infrastructure" in 2020, as of November, my country has built nearly 700,000 5G base stations, achieving 5G coverage in cities at or above the prefecture level in China, providing the necessary support and driving environment for the development of the terminal industry. At present, the number of terminal connections in my country has exceeded 180 million. 2021, as the first year of my country's "14th Five-Year Plan" development, will vigorously promote the development of 5G new infrastructure. 5G terminals are the bridge connecting network infrastructure and industry applications. The innovative development of the terminal industry is the key to the large-scale commercial use of 5G. Looking forward to 2021, the ecological layout of 5G terminals will flourish, and the proportion of commercial use will increase; the penetration rate of 5G mobile phones will continue to increase, and the brand structure will continue to consolidate; the demand for terminal 5G chips is strong, driving the accelerated breakthrough of technology; the promotion and application of 5G in key vertical industries will continue to unfold.

Basic judgment on the situation in 2021

(I) 5G terminal ecosystem is flourishing, with commercial use increasing

As the key platform and control center of 5G applications, 5G terminals provide a physical basis for the integration of traditional terminal devices with emerging technologies such as artificial intelligence. Breaking the situation of mobile terminals being the only ones in the 4G era, in 2020, in addition to traditional terminal types such as smartphones, indoor and outdoor CPEs, modules, hotspots, and adapters, 5G terminals will include new 5G terminal forms such as robots, TVs, notebooks, industrial CPEs, vehicle routers/hotspots, vehicle units, cameras, and encoders. According to relevant data from GSA, the number of 5G terminal forms released worldwide exceeded 200 for the first time in January 2020. As of the end of September, the number of terminal forms has reached 444, and the number of commercial terminals has reached 222. The proportion of commercial terminal types has continued to increase over the past year. Benefiting from the priority deployment of global 5G mid-band network infrastructure, more than 90% of the announced 5G terminals support Sub-6GHz, and 18.9% support millimeter wave communications.

Looking ahead to 2021, the 5G terminal ecosystem will be further strengthened, and the form of industry application terminals such as 5G robots, industrial CPE, and vehicle-mounted modules will continue to innovate and emerge, continuously expanding the extension of 5G terminals. With the deployment of Sub-6GHz 5G network infrastructure and the improvement and promotion of millimeter wave band facility technology, the types of terminals supporting millimeter wave communications will increase, and the 5G full-scenario terminal ecosystem will be further improved.

(II) 5G mobile phone penetration rate is accelerating, and the brand structure continues to consolidate

Mobile phone types account for about 45% of the 5G terminals released in 2020, accounting for nearly half of the total, and are the focus of 5G terminal manufacturers' layout. With the continuous advancement of 5G new infrastructure, my country's 5G mobile phone shipments have shown an overall upward trend. Affected by the COVID-19 outbreak in early 2020, the overall shipments of the smartphone market dropped sharply. With the steady progress of resumption of work and production, as of October 2020, the cumulative shipments of 5G mobile phones in the domestic market exceeded 120 million units, and a total of 183 new models were launched. From the perspective of each month, 5G mobile phone shipments have accounted for more than 60% for 5 consecutive months. In terms of market structure, my country's 5G mobile phone terminal market has gradually matured, and the 5G mobile phone market structure of "one super and many strong" brands such as Huawei, vivo, OPPO, and Xiaomi has stabilized, with the four major brands accounting for a total of 97%, and the market concentration has further increased. In terms of price, the market for 5G brand mobile phones is dominated by 4,000 yuan and above. Huawei, Samsung and others have entered the high-end flagship market with foldable screen 5G mobile phones. As the 5G terminal industry chain matures, the prices of lower-end models such as vivo and Redmi based on Dimensity 1000+ have dropped to around 2,000 yuan.

Looking ahead to 2021, with the effective prevention and control of the COVID-19 pandemic, full resumption of work and production, and wider deployment of 5G new infrastructure, the 5G mobile phone replacement wave will accelerate, and my country's 5G mobile phone shipments and share will further increase. The Matthew effect in the 5G mobile phone terminal market continues to deepen, and branded mobile phone manufacturers will continue to expand their advantages and increase their market share; 5G mobile phone brand manufacturers will continue to compete for the mid-to-high-end flagship market with advanced technologies such as process and folding screens. In terms of low-end 5G models, they will open up the low-end market with more affordable prices, and the price may drop to 1,500, in exchange for market space with profits.

(III) Strong demand for terminal 5G chips drives technological breakthroughs

In 2020, as the 5G terminal market is further opened up, especially the large-scale popularization of 5G smartphones, the market demand for baseband, RF and other chips is huge. In order to overcome the high power consumption and multi-mode and multi-frequency integration problems of 5G, terminal baseband chips continue to develop in the direction of highly integrated Soc chips. At present, the process technology of mobile terminal chips is mainly 7nm. Snapdragon X60, Kirin 9000, Exynos 1080, and Apple A14 use 5nm process. TSMC and Samsung highly monopolize the advanced process chip manufacturing market. The high frequency band of 5G places strict requirements on the design and manufacturing of RF components such as filters and power amplifiers. In particular, the characteristics of the 5G millimeter wave band require continuous promotion of the research and development and commercial use of RF components. At present, American and Japanese companies such as Broadcom, Skyworks, Qorvo, and Murata highly monopolize the RF chip market. In contrast, my country's RF research started late, and its products are mostly concentrated in the 3G/4G mid- and low-end markets. Benefiting from the top-level design dividends of relevant policies such as the 5G industry and integrated circuits, domestic alternatives have appeared in the fields of RF switches, power amplifiers, and SAW and BAW filters.

Looking ahead to 2021, driven by the industrial development policies of the central and local governments, the investment layout in the field of terminal core technology will be further deepened, and the technological breakthroughs and industrial development of 5G chips will promote the industry to enter a stage of rapid growth. Advanced chip manufacturing processes will continue to evolve and break through the 3nm/2nm nodes, and 5nm process chips are expected to be widely used. The RF chip market structure is difficult to break in the short term, and the research and development of 5G chip semiconductor materials and key components will continue to tackle key problems. The industrialization of mid-to-high-end 5G RF chips of domestic companies such as Huawei HiSilicon, Unisoc, Xinwei Communication, Zhuosheng Micro, and ZTE Microelectronics will accelerate.

(IV) 5G promotion and application in key vertical industries will continue

In 2020, with the accelerated deployment of 5G new infrastructure across the country and the freezing of the 5G Rel-16 standard for industrial IoT uRLLC in July, terminal application services have accelerated their extension to various vertical industries. Typical 5G industry applications such as 5G+8K live broadcast of the two sessions, 5G+remote diagnosis of COVID-19, and 5G+industrial Internet smart mines have been implemented, and industry applications around the three major application scenarios of 5G eMBB, uRLLC and mMTC have been continuously explored and developed.

Looking ahead to 2021, the promotion and application of 5G in industries such as major events, medical education, Internet of Vehicles, and Industrial Internet will be carried out in depth. Based on the freezing of the 5G Rel-15 standard mainly for eMBB and the 5G Rel-16 standard mainly for uRLLC, the Rel-17 standard mainly for enhanced backhaul, network slicing, drones, satellites, and Internet of Vehicles will be accelerated in 2021. Industry application scenarios such as 5G+Internet of Vehicles, 5G+telemedicine, 5G+Industrial Internet, and 5G+smart cities will be fully opened, and the application operation model, business model, and market positioning of 5G terminal applications in different industries will also be further clarified.

Several issues that need attention

(I) It will take some time for the large-scale deployment of 5G new infrastructure to be completed

The large-scale deployment of 5G new infrastructure provides the necessary support and driving environment for the development of the terminal industry. It will take a long time for the deployment of 5G network infrastructure to shift from the NSA mode to the SA mode that supports uRLLC and mMTC scenarios, with full coverage, high-speed and large-capacity core network and bearer network upgrades. The investment and construction costs are huge, and the payback period is long. 5G base stations consume a lot of energy. The power consumption of a single station is about 2.5~3.5 times that of a 4G single station. In addition, the coverage area of ​​5G base stations is much smaller than that of 4G base stations. Based on an estimate of 3 times the number of 4G base stations, the power consumption of 5G base stations will reach 9 times that of 4G. Telecom operators face the dual pressure of existing network power supply, supporting equipment expansion and high electricity bills in promoting network infrastructure deployment and power distribution operations.

(II) Key core chips and component technologies need to be continuously developed

At present, the industrialization of 5G chips in my country is not yet mature. The preparation of semiconductor materials in the upstream of the industrial chain is subject to the control of developed technological countries. The overall advanced process technology of chip manufacturing is backward. In particular, the current situation of Sino-US technological decoupling has increased the threat to the development of my country's 5G terminal industry chain. In 2020, the EUV lithography machine transaction between SMIC and ASML and the advanced process chip foundry cooperation between Huawei and TSMC were interrupted. Compared with foreign countries, there is a certain gap in performance and production capacity of my country's 5G medium and high frequency devices. At present, the market for high-speed and high-precision analog-to-digital conversion chips is monopolized by American giants such as Analog Devices and Texas Instruments, and the market for bulk acoustic wave filters and power amplifiers is also dominated by American Broadcom and Skyworks. In 2021, the continued increase in the commercial scale of 5G terminals will drive a substantial increase in the demand for core chips and key components. Key semiconductor materials, advanced process technology, key 5G medium and high frequency devices, etc. will become the top priority for coordinated research by enterprises in my country's industrial chain.

(III) The number of terminal modules is small and the price is high

Currently, there are more than 20 suppliers in the world that provide more than 60 5G modules. According to relevant statistics, the price of 5G terminal modules has dropped to around US$100, but it is still close to seven times the price of 4G modules. In addition, according to GSA statistics, 144 5G terminal types have been released worldwide. In addition to nearly half of the smartphone categories, they still include CPE, drones, TVs, notebooks, car modules and other multi-form types. Among them, the number of module forms is 64, and only 11 have been commercially used. The scarcity of terminal module types is also a reason for its high price. In 2021, as the scale of 5G application fields expands and application scenarios become increasingly rich, reducing the price of 5G terminal modules and increasing the richness of module types will be key factors in the prosperity of the terminal ecosystem.

(IV) Industry application innovation support and commercial exploration still need to be strengthened

At present, the support capacity for innovation in 5G terminal industry applications is insufficient. The opening of industry application capabilities that integrate the application of new generation information technologies such as 5G, AI, and big data, the development of common platforms, and the establishment of related testing and certification platforms are in the initial stage. There is no unified terminal application standard for multiple vertical industries such as education, medical care, industrial Internet, and Internet of Vehicles. Requirements such as interoperability, security and privacy cannot be guaranteed, and technical and commercial feasibility need to be further explored and verified. In terms of commercial exploration of terminal industry applications, there are many scenarios for the promotion and implementation of industry-level applications such as 5G+Industrial Internet and 5G+UHD video, but in vertical industry applications such as 5G+Internet of Vehicles and 5G+Smart Medical, they are mostly demonstration applications and have not yet formed sufficient market influence. In 2021, the terminal application innovation support capacity based on the three major application characteristics of 5G will be accelerated and improved, and the implementation of vertical industry scenarios and commercial application promotion models urgently need to be explored.

Suggested countermeasures

(I) Steadily promote the deployment of 5G new infrastructure and give full play to the supporting role of the infrastructure

We will give full play to the guidance of the national top-level design, promote telecom operators to continue to deploy 5G independent networking, gradually expand coverage, increase support for site land and electricity, coordinate the construction of supporting facilities such as computer rooms and pipelines, and promote the opening and sharing of social tower resources such as municipal light poles to 5G network facilities. Taking into account the existing spectrum resources and technologies, spectrum characteristics, and the degree of perfection of the industrial chain of operators, we will improve the industry's competitive environment, promote the development of high-frequency band resources, and build dedicated network facilities for different industries, and continue to play the role of 5G new infrastructure in supporting the development of the terminal industry.

(II) Strengthen the research and development of key 5G core technologies and continue to promote the layout of standards

We will increase support for the research and development of basic core technologies, accelerate the iterative upgrade of advanced chip manufacturing processes, focus on promoting the R&D and industrialization of medium and high frequency devices such as filters and power amplifiers, and steadily promote the breakthrough of the "bottleneck" problem of my country's 5G terminal industry. We will continue to increase the innovative R&D of 5G evolution technology, guide domestic research institutes and related enterprises to strengthen the construction and layout of patent groups, promote the construction of independent intellectual property protection pools, and continuously promote the innovative R&D of 5G terminals under the iterative upgrade of 5G evolution technology, and continuously enhance the competitive advantage of my country's 5G terminal industry.

(III) Build 5G terminal service support capabilities and promote collaborative innovation in the industry chain

Encourage qualified enterprises to build common platforms such as application development environment and capability opening, support the construction of testing and certification platforms for 5G terminal systems, equipment, services, security and other aspects, and effectively enhance the service support capabilities of the terminal industry. Gather the innovative resources of "production, learning, research and application" to promote the cooperation between the upstream and downstream of the terminal industry chain, the communications industry and vertical industries. Relying on the good domestic 5G industry development opportunities, support 5G terminal equipment companies to give full play to their advantages, drive the development of core technology companies such as semiconductor materials, chip manufacturing, key components and modules through market-oriented means, and create a platform-based terminal industry ecosystem that brings together upstream and downstream.

(IV) Promote 5G terminal innovation and popularization, and accelerate the implementation and promotion of industry applications

Deeply explore and dig into consumer needs on the To C side and business models for To B industry applications, promote the development of multi-format, multi-functional 5G terminals that integrate new technologies such as AI, VR, and ultra-high definition, enrich the terminal innovation product library for integrated applications in multiple vertical industries, and accelerate the improvement of 5G terminal equipment performance and application maturity. In-depth summary and analysis of the commercial development experience of the widely carried out 5G demonstration application pilot program design, verification, integrated delivery, operation and maintenance, and operation in China, accelerate the implementation of 5G industry-level terminals in the fields of medical education, ultra-high definition broadcasting, industrial Internet, and Internet of Vehicles.