Race to 5G Trips Over Trade War … For Now

Monday, August 19, 2019
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5G — or fifth-generation wireless — is a game-changer. It means higher speeds and the end of network latency. And it is here today.

But the profit opportunity is just getting started. I'm talking about a $12.3 trillion 5G boom.

What makes 5G so impressive, and so revolutionary?

It's the speed. On 4G, the average download speed is 100 Megabits per second (Mbps). On 5G? That jumps up to 10 Gigabits per second (Gbps).

In other words, it's 1,000x faster!

To put simply, 5G would allow you to download an entire season of your favorite show in mere minutes.

Telecom giants are diving into the 5G race headfirst.

AT&T (T) and Verizon (VZ) have already started to roll out their 5G networks in select cities. Phone company Motorola retrofit its two-year-old Moto Z2 Force smartphone to be compatible with its 5G network, called 5G Moto Mod.

Apple (AAPL) fans will have to wait for their upgrade. The Cupertino, Calif., giant announced previously that its 5G won't be rolled out until 2021.

Companies aren’t the only ones desperate to be the first on the 5G stage. There are big economic and geopolitical outcomes for whomever hits this tech milestone first.

And countries are getting competitive …

In a report for the U.S. Department of Defense, the Defense Innovation Board — an American group of business leaders and academics — claimed "the leader of 5G stands to gain hundreds of billions of dollars in revenue over the next decade."

According to them, said leader also stands to support widespread job creation across the wireless technology sector.

The outcome of this tech race will determine if the U.S. can keep its position as a tech leader. For China, winning the race would be an opportunity to suppress the U.S. and truly reach superpower status.

Whoever holds the tech, holds the power. And that brings us to the trade war.

Beyond the tweets and tariffs of the trade war, there's the tech race. Because 5G isn't just about how quickly you can stream "Stranger Things" or upload your photos onto Facebook (FB). 5G technology is seen as the foundation of everything from self-driving cars to futuristic "smart cities."

Related post: Smart cars pave the way to profits in smart cities

How 5G is developed and implemented, and who controls it, will definite the next generation of internet use and connectivity. More concretely, about $12.3 trillion in global economic output is at stake, according to IHS Markit.

Behind the big-name carriers, the race is on with equipment companies. And it's here where smart investors are looking for big profits.

Companies like Inseego Corp. (INSG), a global Internet of Things (IoT) firm that's right in the middle of the 5G revolution.

Among other products, it makes the 5G routers Verizon and others will use to bring broadband video on demand to U.S. households.

It took wireless connectivity to a whole new level by releasing its 5G MiFi M1000 for Verizon. This is the first generally available 5G mobile broadband hotspot in the U.S.

So far, it's only in five cities, but both companies are looking to expand to 30 cities before the end of the year.

Second-quarter earnings reflect these successes. Revenue jumped 13.9% year-over-year to $55.9 million overall, with IoT and mobile solutions revenue clocking in at $40 million. That's an increase of 26% from the previous year.

Beyond the steps it's already made in the industry, Inseego also stands to benefit as the trade war continues. Direct competitor Huawei's products remain banned in the U.S., and tariffs heavily penalize other Chinese products coming in.

Despite President Trump's decision to delay many tariffs until after the holiday shopping season, this San Diego, Calif., company stands to make a big impact as bigger telecom companies will be forced to look for domestic suppliers.

While the company is small, I consider it to be part of a larger 5G sub-portfolio I plan to build out. There will be semiconductor and services special situation recommendations as opportunities present. Inseego is a good start for more aggressive investors.

All the best,
Jon

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