Early adopters are used to paying more for the privilege of being the first to own the latest tech, but these premiums are set to be higher than ever when it comes to the first wave of 5G devices.
5G is exciting technology, but it comes with its own unique set of manufacturing challenges and these are destined to drive up prices for both manufacturers and consumers. Netgear's Vice President for its Service Provider Business, Graeme McLindin, told us that adding 5G to one of its portable hotspots can double the cost.
"At the moment, because it's new evolving technology, the premiums we're seeing on 5G over 4G for product builds are 2x," said McLindin. "They're a significant jump up."
Doubling manufacturing costs obviously means customers will pay more too. The LG V50 ThinQ is the only 5G phone with an Australian price tag so far, and it will sell for $1,999. For comparison, its predecessor - the LG V40 - retails for $1,299. The primary difference between the two phones is a newer processor and 5G connectivity. Smartphone maker OnePlus expects 5G will add between USD$200 and $300 to the price of its devices, which currently sell for about USD$549.
So why does 5G attract such a premium? Part of the increase relates to the 5G modem itself which is a separate component, rather than being integrated into a single System on Chip. That’s an extra component a manufacturer has to buy and design around. Qualcomm has a 5G System on Chip solution in the works, but this won't be in devices until early 2020.
There are a number of other design considerations that add to the cost of 5G devices. Bigger batteries and extra antennas are both necessities. In the case of the V50, LG completely re-engineered the phone’s cooling mechanisms.
The need for extra components and bigger batteries could also lead to larger devices. Samsung’s first 5G smartphone, the Galaxy S10 5G, has a massive 6.7-inch display, dwarfing the already sizeable Galaxy S10+. Despite the increase in size, the phone makes some trade-offs. For example, storage isn’t expandable - there’s no microSD card slot on the device.
HMD Global - the manufacturer of Nokia branded smartphones - has yet to detail any plans regarding 5G devices, but Pranav Shroff, the company’s Head of Global Portfolio and Product Planning, says the first wave of 5G phones won’t be worth the money.
"I don't think that at this point in time - especially when the networks are getting ready - it's going to be meaningful for a consumer to invest that amount of money," said Shroff. "So the cost versus the benefit, at this point in time for the consumer, is not really adding up."
Shroff has a point: there’s not much use in selling 5G devices when 5G networks are still very much a work in progress. Locally, Telstra and Optus are both in the process of building out their next generation networks, but 5G coverage won’t be ubiquitous overnight. It will take years for Australian 5G coverage to match what we currently get with 4G.
And of course, there’s the question of exactly what benefits you get from being an early adopter of 5G. Shroff doesn’t believe incremental performance gains will be enough to drive upgrades.
"Streaming has been the biggest use case for 4G," said Shroff. "You see consumers on buses and trams and on the metro just consuming video on their phones and that was enabled by 4G. This has reached a level where consumers are satisfied, broadly, by the experience of the video. So what is the next leap? I see a lot of mentions of gaming, but again, I think that's an incremental benefit."
OPPO Australia Managing Director Michael Tran is more optimistic.
"I think [5G] is what consumers are waiting for - especially in Australia," said Tran. "We're such early tech adopters. Consumers in Australia love their tech and they do so much research. They're going to want a 5G device when it hits the market."
But even if Australians aren’t necessarily interested in 5G, Tran says 5G devices will have plenty of other "amazing specs and features" including top-of-the-line processors, and in OPPO's case, a camera with 10x lossless zoom.
Given OPPO’s reputation for accessible smartphone pricing, its 5G device might not launch at the same kind of eye-watering price-tag we’ll see on some 5G handsets. But unless OPPO is willing to sacrifice some of its profits, the phone will almost certainly be pricier than your standard OPPO 4G handset. After all, the company has the same component costs and manufacturing challenges to address as the rest of the industry.
In the longer run, 5G devices will come down in price - it's just a question of when. Qualcomm's upcoming integrated 5G chipset will help. Netgear's McLindin believes it will take two to three years for 5G to become accessible enough to go mainstream, and HMD's Shroff says it could take up to five.
But after years of talk, 5G is almost here. It’s now just a question of whether it’s worth the upgrade.
Alex Choros
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