(The Motley Fool) Apple (NASDAQ:AAPL) is set to unveil its 5G iPhones on Tuesday at a virtual product event. The new flagship handsets aren’t expected to ship until November because of delays related to the coronavirus outbreak.
Ahead of that unveiling, 5G penetration of smartphones in the U.S. continues to climb higher, according to recent estimates from Counterpoint Research.
Here’s what 5G investors need to know.
5G penetration in 2020 expected to reach 20%
5G handsets represented 13.5% of all smartphones sold in the U.S. in August, according to Counterpoint. Penetration has been climbing throughout 2020, although the metric dipped in May. At the beginning of the year, 5G penetration was a mere 3% of U.S. smartphone sales.
For all of 2019, 5G penetration was just 1%. The first batch of 5G smartphones from last year had some serious drawbacks though: They were extremely expensive and had issues with overheating. Smartphone manufacturers are starting to address those problems while wireless carriers continue expanding 5G coverage. Apple’s foray into 5G is widely expected to jump start the 5G smartphone market.
“When Apple begins selling 5G iPhones, this will sharply increase the market share of 5G devices on a monthly sell-through basis,” Research Director Jeff Fieldhack said in a statement. “Overall, we expect 5G smartphones to make up around 20% of total sales in 2020.”
Falling prices for 5G smartphones have been key in driving up adoption and penetration. The average selling price (ASP) of a 5G phone has fallen by over $300 over the past year to reach $730 in July, Counterpoint notes. Samsung has been leading that downward trend by releasing numerous mid-range phones with 5G like the Galaxy A71 5G and Galaxy A51 5G. The Galaxy A Series is the South Korean conglomerate’s mid-range lineup, targeting prices closer to $500.
Counterpoint says that carriers are also trying to bring prices down to boost 5G adoption among customers. T-Mobile recently launched the LG Velvet 5G for $588 as an exclusive, for example, although Verizon is requiring all 5G smartphones on its network to support mmWave frequencies. That requirement adds $50 to $100 to a phone’s bill of materials (BOM), Counterpoint estimates.
5G will power the smartphone market’s recovery
The COVID-19 pandemic has wrecked the global smartphone market this year, which is expected to see its biggest drop ever in 2020 in terms of unit volumes before potentially bouncing back in 2021 thanks to 5G. The broader 5G ecosystem continues to mature, with carriers continuing to deploy both mmWave and sub-6 GHz frequencies while smartphone vendors are working to bring prices down.
It’s unclear how Apple will price its lineup of 5G iPhones, but we’ll find out in just a couple of days.