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The bill of material costs for the first flagship 5G smartphones could be between 20% and 30% higher than for the 4G equivalent, according to analysts at Taiwan-based TrendForce. This suggests that suppliers and mobile network operators will be able to command a substantial price premium from early adopters.
TrendForce’s view matches predictions from the UK’s largest operator, EE, whose CEO said in November 2018 that 5G would be more expensive for consumers, and that this would push mass adoption in the UK out to around 2021-22, when more manufacturers will have more widely developed product portfolios, bringing prices down. This is despite EE’s plan to launch commercial 5G in the UK in 2019.
In its latest market forecast, TrendForce said only five million 5G smartphones would be produced in 2019, representing a penetration rate of just 0.4%, with Chinese Android brands such as Huawei, One Plus, OPPO, Vivo and Xiaomi the first to market.
The increased costs of 5G devices stem from two major improvements that must be made. First, application processors must be paired with 5G modems, and second, additional peripheral components such as Wi-Fi and power amplifier modules will be needed to enhance reception and signal filter performance. As a result, the first 5G smartphones are likely to be larger and thicker.
As-yet unresolved issues with the design of 5G devices will also bump up costs, said TrendForce. Manufacturers are currently finding thermal dissipation a big challenge because the new antenna components needed for 5G will generate more heat and consume more power.
This will influence the materials used for device casing. Metal may interfere with 5G signals, so its use will probably be cut back, which means more plastic and glass will be used, requiring more advanced manufacturing technology.
Unfortunately, said TrendForce, these problems around power consumption, component costs and end-user pricing strategies need to be tested by the market and this requires a more mature 5G ecosystem.
Although it named no specific countries, TrendForce noted that in many places, operators and network builders are not working quickly enough to complete their testing and deployment in order to facilitate a 2019 launch. Therefore, “it is estimated that the 5G infrastructure will not be completed by 2022”, it said.