Pandemic ‘cuts returns’ for 5G as vendors turn out more 5G chips

Pandemic ‘cuts returns’ for 5G as vendors turn out more 5G chips

Janice Chong Fitch Ratings 16x9.jpg

Spending on 5G will increase over the next two years but the tough economic environment will delay economic returns, according to a report today from Fitch Ratings.

Meanwhile semiconductor makers are producing more chips for 5G, with the total now reaching 20 commercially available mobile processors/platforms and eight commercially available discrete 5G modems, according to another report from the Global Mobile Suppliers Association (GSA).

The pandemic’s effects on 5G will be short-lived, said Fitch. Diverging capex patterns have emerged during the pandemic, with 5G priorities advancing in South Korea, China, Taiwan, Singapore, Australia and the US, said the company.

Fitch Ratings director Janice Chong (pictured) said: “Higher-than-expected 5G investments and low visibility on investment returns will keep free cash flow constrained, reducing rating headroom over the next three years.” (PDF of report here.)

The company said that nearly half of the 90 publicly rated companies in its global telecom portfolio, excluding tower companies, “have low rating headroom, underlining the importance of prudent capital management through staggered investments, dividend cuts, and non-core asset sales to preserve balance-sheet strength”.

After an uneven start across the Asia Pacific region, “Europe and the Middle East are likely to ramp up 5G rollout in 2021-2022, followed by Latin America”.

Fitch warned: “The alternative of deprioritising 5G may put telcos at risk of falling behind rivals, as capex and spectrum spending are vital in preserving competitive capabilities in an increasingly commoditised sector.”

The company pointed out that 5G services in countries where services have been launched “are still limited, as pandemic-related disruptions led to the deferment of discretionary capex in most markets for operators to conserve cash or prioritise necessary capacity investment”.

The GSA noted in its report, also out today, that 5G chipsets are now available from Hi-Silicon (Huawei), Mediatek, Qualcomm, Samsung and Unisoc (formerly Spreadtrum). “All five players have been expanding their product ranges,” said the GSA.

“In addition, GSA had identified two pre-commercial 5G modems. The maximum peak theoretical speed claimed to be offered by any of the commercial discrete 5G modems currently reaches 7.5Gbps download and 3.67Gbps upload.”



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