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How Important Is 5G To Apple?

5G is here! Well, sort of. While companies like LG, Nokia, Samsung, and most-recently Apple (NASDAQ: AAPL), have released 5G-capable smartphones, the infrastructure for a proper non-hybrid 5G ecosystem is still in its early stages. Apple announced the release of its latest flagship model, the iPhone 12, on October 13 and is hoping to lift sales of the product. 

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iPhone sales have declined from comprising nearly 70% of Apple’s total revenue in Q1 2018 to roughly 44% in Q3 2020 — a 37% drop. In contrast, its Services and Wearables divisions have grown 130% and 74%, respectively, in overall revenue representation in the same time period. With pandemic-fueled unemployment and belt-tightening, will people snatch up the latest Apple product with the same vigor as in the past?

 

Why upgrade?

Considering this, Apple released a model at a lower price point with the $699 iPhone Mini, the smallest iPhone ever released. Additionally, all four iPhone 12 models will have, according to Apple, the toughest front glass display on the market with its Ceramic Shield technology, which has four times better drop performance; the lineup is also thinner and lighter than previous models. Along with these attractive features, there is 5G, which will attract more customers as the infrastructure continues to grow and more advanced apps are developed to take advantage of the technology.

For these reasons and the fact that over 36% of iPhone users haven’t upgraded in at least 3 years, analysts are predicting an upgrade supercycle for the company, something that hasn’t happened since 2014 when Apple launched the larger iPhone 6. Along with Apple offering the smallest iPhone, it is also offering its largest with the iPhone 12 Pro Max, hoping to capture the same momentum it had in 2014. 

 

Will 5G help?

5G promises download speeds of 20 gigabits (GB) per second as opposed to only 1GB per second with 4G, as well as reduced latency and higher connected device capacity. This will help users stream and download high definition videos faster, experience seamless augmented and virtual reality (A/VR), and ultimately feel like they’re walking around with their own personal Wi-Fi connection. For Apple loyalists, there is no other option for a smartphone than the iPhone, and 5G is considered a game-changer for gadget enthusiasts. 

On the diversification front, analysts expect 5G to give Apple a significant boost not only in iPhone sales but in its two growing sectors as well: Wearables and Services. For Services, in its cloud-based gaming service, Arcade, by making the experience ultra-responsive. For Wearables, Apple’s upcoming smart glasses will benefit from the tech as it will most likely rely on A/VR and if its current Wearables sector is any indication, this new gadget will be a big seller like the company’s AirPods and Apple Watch. Apple’s Services division is on track to be worth $100 billion by 2024 and the wearables market is projected to reach $64 billion by then, of which Apple holds an impressive 34% market share. 

Apple’s iPhone 12 line was delayed by a month due to the pandemic and it wasn’t the first 5G smartphone to be released — that honor belongs to Samsung in the U.S. and ZTE abroad. I don’t think this will affect Apple’s smartphone market share of over 45% as it has an extremely loyal consumer base. In fact, the company is anticipating sales of the new iPhone to exceed 100 million units this year alone. Ultimately, 5G, although in its infancy, will help boost Apple’s revenue by offering improvements not only in speed and latency but also by amplifying its growing Services and Wearables divisions in the near future.

 

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