Van’s Note: Van Bryan here, Jeff Brown’s longtime managing editor. Today, we’re continuing our 2021 prediction series with Jeff. And we’ll be talking about a topic that longtime readers will know well: 5G networks.
Read on to see why Jeff made a “major miscalculation” for 5G in 2020 and discover his No. 1 5G prediction for 2021.
Van Bryan: Jeff, let’s turn to 5G. It’s a topic you’ve been covering for years now. And let’s start by looking at how your 5G prediction for 2020 turned out.
Jeff Brown: My first public recommendation for a 5G company was in March 2017. And I was aware of the investment potential for 5G long before that.
So yes, I’ve spent a long time covering this technology. But despite what we might think, it’s still just getting started. This will be a decade-long investing trend.
When we spoke last year, I predicted that we’d see a tidal wave of 5G devices sold. I put a number on it: more than 300 million sold in 2020.
I’ll admit that I was slightly off. Right now, it looks like 250 million 5G-enabled devices will be sold by the end of 2020. It’s just shy of my 300 million prediction.
But there were some extenuating circumstances that really held back sales of 5G phones this year.
Van: How do you mean?
Jeff: Well, it comes back to COVID-19 and the economic lockdowns. Especially in the second quarter, there were supply chain disruptions, manufacturing delays, and work stoppages. And all of this ultimately led to Apple delaying the release of the 5G-enabled iPhone 12 by two months.
Losing two months of manufacturing and sales at the end of the year really impacts how many 5G devices are sold in the calendar year. When you consider all of that, selling 250 million units is remarkable.
But here’s the important point. These delays have led to a lot of pent up demand for new devices.
I meant to ask. Did you buy a 5G phone this year?
Van: I did. I bought an iPhone 12. It took about four weeks to be delivered.
Jeff: Right. Same here. My new iPhone took over a month to show up at my door. Apple is literally struggling to keep up with the demand right now. And I’m actually going to skip ahead to my first 5G prediction for 2021.
I predict that shipments for 5G devices in 2021 will exceed 500 million. And there are really two reasons for that.
First, we know that demand for these devices didn’t go away. But because of all the delays related to the supply chain disruptions, that demand is going to be pushed into 2021.
The other thing that happened is that there are now a lot of mid-range 5G phones available. These are less expensive phones that still can connect to 5G networks. So if we can’t afford a $1,000 Apple iPhone, we can purchase a cheaper 5G phone for a few hundred dollars. That opens up this technology to a larger percentage of the global population.
Van: What would the investment implications of that be?
Jeff: We’ve already had some great success with Phase Two 5G companies. This tells me that 2021 will continue to be a great year for those investments.
Van: For new readers, catch us up on the different phases of 5G.
Jeff: A technology like 5G rolls out in three phases.
Phase One is the infrastructure phase. Think of things like network towers and fiber-optic lines. We really entered Phase One in 2017. And it’s still going today.
Phase Two is the devices phase. That’s when the network begins to go online, and we start to see smartphones and other devices that can access these networks go on sale. So Phase Two investments really mean we are investing in companies that provide essential components to these 5G devices.
And I’m excited to see how the new hardware that’s going into these 5G phones will be experienced by consumers. Every 5G iPhone, for example, is being shipped with a semiconductor designed for artificial intelligence (AI) technology. And all of the iPhone Pros have a light detection and ranging (lidar) detector on them
These components enable things like natural language processing, computer vision, depth perception, and the ability to augment your surroundings with your phone using augmented reality.
Right now, two of my favorite Phase Two 5G companies are up 99% and 179% in our model portfolio. And they’re going higher in 2021.
[Van’s Note: Paid-up readers of The Near Future Report can go right here to learn the names of Jeff’s favorite Phase Two 5G companies. And for readers who would like to join as a paid subscriber, go right here.]
Phase Three is the services phase. That’s when we start to see applications running on these networks. And that leads me to my next prediction.
I predict that we will enter Phase Three by summer of 2021.
By then, there will be hundreds of millions of 5G devices in consumers’ hands. And 5G networks will be live in hundreds of cities around the world.
At that point, developers will recognize that there is enough of a base of users to start developing 5G applications. So think of things like massive multiplayer games over a mobile phone. That’s not possible with 4G. It will be with 5G.
And this starts something of a virtuous cycle: Most people don’t really care about the technology. But they will care if there are exciting applications that can only be accessed with a 5G phone.
So more and more consumers will go out to buy a 5G phone to access these applications. That leads to more 5G devices in the field, which leads to more 5G apps being developed. And the cycle feeds on itself.
Van: Same question as before. What are the investing implications as we enter Phase Three?
Jeff: What few people understand is that 4G was instrumental in some of the greatest technology success stories of the past decade.
Uber, Lyft, Amazon, Spotify, Facebook – all these companies have 4G to thank for their success.
After all, without the network speeds of 4G, Uber and Lyft’s technology would be impossible to use. The 3G bandwidth simply wouldn’t cut it.
And I bet most people won’t know this, but as much as 80–90% of Facebook’s traffic and revenue comes from mobile phones. For Amazon, up to 70% of people use the Amazon app to place their e-commerce orders.
Without 4G, these companies wouldn’t exist, or else they’d be a fraction of the size they are today. It will be the same story with 5G, but the opportunity will be much larger.
5G is going to open up a suite of Phase Three applications: self-driving cars, Internet of Things, robotic surgery, and massive online multiplayer games. All of these technologies need 5G. The investment opportunities going forward will be enormous.
Van: I’m going to give you the last word. Anything else you’d like to add about 5G before we close the book on the topic for the year?
Jeff: The big thing I would like readers to know is that the 5G investment trend is not over. A lot of people tend to think that 5G is played out because they see 5G commercials or because they now have a 5G phone. No way.
Earlier this year, I actually took a tour of the country to see these networks for myself. I called it my “5G Heartland Tour.” I’m a big believer in “boots on the ground” research. So I knew I had to see these networks for myself.
[Van’s Note: For readers who missed the footage of Jeff’s 5G Heartland Tour, click the image below.]
It was a great experience. The technology works just as advertised. But that tour did make me realize something important. I actually made a major miscalculation in my original 5G research.
During my initial research on 5G in early 2017, I said the United States would need one million 5G towers to build a functional network.
But I was way too conservative.
I now estimate that the infrastructure for fifth-generation networks will be five times larger than I originally projected.
That means more money flowing into 5G companies and more 5G-related investment opportunities.
We’re still in the early stages of a decade-long 5G boom. Fortunes will be made over the next 10 years. And any investors sitting on the sidelines will regret letting the opportunity slip by. I’ll make sure my readers don’t make that mistake.
Van: Thanks as always, Jeff.
Jeff: Of course, any time.
Van’s Note: Be sure you check your inbox tomorrow afternoon for our next edition of The Bleeding Edge. I’ll be sitting down with Jeff to discuss CRISPR genetic editing and the booming field of precision medicine. During that interview, Jeff will reveal the “second crop” of CRISPR stocks set to debut in 2021.
And as Jeff mentioned above, we’re still in the early stages of the 5G boom. For any investors who haven’t positioned their portfolio for 5G profits in 2021, now is the time. Go right here to discover Jeff’s top small-cap 5G recommendations for the new year.
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