Dead calm be­fore the 5G storm

Qual­comm, Ap­ple and oth­ers suffer big smart­phone slump ahead of 5G roll­out. But will next year re­ally bring re­lief ?

The Standard (St. Catharines) - - Business - DAN GAL­LAGHER

The global smart­phone mar­ket is tak­ing a sig­nif­i­cant pause ahead of the roll­out of 5G ser­vices. The big ques­tion is just how long that pause will last.

Mar­ket re­search firm IDC re­ported Wed­nes­day that global smart­phone sales fell 2.3% year over year dur­ing the June quar­ter. That is the sev­enth straight quar­ter of de­clines for the in­dus­try. IDC’s data showed iPhone unit sales falling 18% to 33.8 mil­lion, which would be the low­est num­ber of quar­terly sales that Ap­ple’s iconic smart­phone line has seen in six years. Ap­ple no longer re­ports unit sales it­self, but the com­pany said in its fis­cal third-quar­ter re­port Tues­day that iPhone rev­enue for the same pe­riod slid 12% year over year to about $26 bil­lion.

Qual­comm painted an even bleaker pic­ture on Wed­nes­day. Fis­cal third-quar­ter rev­enue came in a bit below Wall Street’s es­ti­mates, though ad­justed per­share earn­ings ex­ceeded ex­pec­ta­tions. But the com­pany’s fore­cast was a dif­fer­ent story, with Qual­comm es­sen­tially pro­ject­ing a sig­nif­i­cantly weaker busi­ness for the next two quar­ters as de­vice mak­ers and wire­less car­ri­ers clean out in­ven­tory ahead of a big 5G push next year.

Qual­comm is also hurt by its con­tin­ued roy­alty dis­pute with Huawei and the fact that the Chi­nese smart­phone gi­ant uses its own chips for de­vices sold in that coun­try. This means that 5G can’t ap­pear on the scene soon enough for Qual­comm, Ap­ple and oth­ers in the smart­phone busi­ness.

Wire­less car­ri­ers are in­deed push­ing hard to up­grade their net­works to the next-gen­er­a­tion tech­nol­ogy. AT&T said on its earn­ings call last week that it ex­pects to have “na­tion­wide 5G cov­er­age” by the mid­dle of next year. Ver­i­zon said on its own call Thurs­day morn­ing that it ex­pects to have 5G ser­vice up and run­ning in 30 mar­kets by the end of this year. China also aims to have na­tional 5G net­works in place next year,

Billed as the next gen­er­a­tion of wire­less net­works, 5G prom­ises blaz­ing speeds and a vastly in­creased data ca­pac­ity needed to un­der­pin fu­ture tech­nolo­gies, such as au­ton­o­mous cars.

But early re­views of 5G ser­vices have been rough, not­ing the ser­vice’s spotty availabili­ty and the ten­dency of the phones to over­heat.

And those phones are ex­pen­sive: the 5G ver­sion of Sam­sung’s lat­est Gal­axy S10 lineup costs about 30% more than an equiv­a­lent model with­out 5G. Wire­less cus­tomers are al­ready re­sis­tant to hand­set prices that have been creep­ing well over the $1,000 mark, and it is un­clear whether faster ser­vice in limited mar­kets will be enough to con­vince them to ab­sorb fur­ther price in­creases.

And while Ap­ple hasn’t an­nounced its plans, the com­pany isn’t ex­pected to in­tro­duce a 5G iPhone un­til late next year. That too will likely be a sig­nif­i­cant con­straint on 5G de­mand given the fact that the iPhone has lead­ing mar­ket share at the premium end of the smart­phone mar­ket where cus­tomers are more likely to up­grade early. As fast as 5G ser­vice prom­ises to be, the wait will be painful.

NG HAN GUAN THE AS­SO­CI­ATED PRESS FILE PHOTO

Chip-maker Qual­comm pro­jected sig­nif­i­cantly weaker busi­ness over the next few months as de­vice man­u­fac­tur­ers and wire­less car­ri­ers clean out in­ven­tory ahead of a big 5G push next year.

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