Apple’s Rivals See 5G as ‘Golden Opportunity’ to Beat iPhone

(Bloomberg) -- Now that the first 5G devices are hitting the U.S. market, Apple Inc. is under more pressure to start readying a comparable iPhone — or watch its dominance come under attack.

Already, Motorola Mobility Holdings has a quasi-5G phone out — it requires a snap-on module — and Samsung Electronics Co. will start selling its own version through Verizon Communications Inc. on April 18. LG Electronics Inc. is planning to launch one at Sprint Corp. “very soon” and is trying to accelerate the rollout of a model for Verizon, aiming to capitalize on the frenzy surrounding the ultrafast network technology.

In fact,  all the big U.S. handset sellers have shown, announced or launched 5G devices. All except Apple, the industry leader that accounts for nearly half the smartphone shipments in the U.S. The company isn’t expected to release a compatible iPhone this year, and even 2020 isn’t a sure thing.

“They can probably get by in 2019 without a 5G handset,” wireless-industry consultant Chetan Sharma said. “But in 2020, if they don’t have a 5G handset, it could impact their market share. Not just in the U.S., but also other markets.”

It’s hard to gauge the risk for Apple if it’s a laggard in the 5G race. The company smoothly navigated relatively late transitions to 3G and 4G, though that was when the iPhone was still the hot new thing.

5G networks also still have to be built out, and the wireless signals are prone to interference. It’s no sure thing that consumers will embrace 5G by 2020, regardless of what Apple does. The early 5G phones will potentially be pricier and bigger than some of their slower counterparts, a short-term drawback to the technology.

Complicating matters is a bitter legal battle with Qualcomm Inc., the biggest maker of key 5G chips. Apple has challenged Qualcomm’s patent-licensing practices, and the case is slated to go before a jury in San Diego later this month.

The need for 5G chips may give Apple reason to quickly settle the case, Sharma said. Apple currently works with chipmaker Intel Corp., which doesn’t expect to be able to sell 5G components at scale until 2020. If Apple sticks with that supplier, it may not get a phone out in the market until 2020 or even 2021, according to Jeff Fieldhack, research director at Counterpoint Technology Market Research.

The company could also develop something internally: Recent job ads have hinted that Apple may be developing its own 5G chip. But that approach may be more challenging. Apple, based in Cupertino, California, declined to comment.

Qualcomm says it’s willing to work with Apple on 5G.

“If we are a leader in 5G, and smartphone companies including Apple want to be a leader in a 5G era, they are going to be interested in working with Qualcomm,” Cristiano Amon, president at the chipmaker, said in an interview.

Apple’s phone rivals aren’t wasting any time.

“This is a golden opportunity for us,” Yasser Nafei, a senior vice president at LG, said in an interview. “Apple didn’t want to get into this game fast.”

LG had originally planned to launch a 5G phone on Verizon’s network in the second half of the year. But now it’s trying to speed up that schedule, Nafei said.

Motorola is stepping on the gas as well, said Doug Michau, executive director of North American product operations.

“There are some early adopters that really want a 5G device, so I think we could see some market-share gains,” Michau said.

In total, some 30 devices with 5G are ready to go worldwide. That’s a much faster transition than what you saw with 4G, said Qualcomm’s Amon.

“For the first time, the devices are ahead of the network,” Amon said.

Verizon, the biggest wireless carrier in the U.S., expects to have 5G in 30 cities by year-end. AT&T Inc. and Sprint also are in the early stages of their rollouts.

Apple’s go-slow approach could test users’ loyalty. While currently at least 90 percent of Apple’s iOS users tend to upgrade to another Apple product, the lack of a 5G handset “could double the amount of people switching from iOS to Android,” Fieldhack said.

“That would be very concerning for Apple because the U.S. market is already not growing,” he said.

For consumers, this jockeying among handset suppliers could help push down prices. In 12 to 18 months, a 5G device should be around $750 or even less, making it a mass-market product, LG’s Nafei said.

The bigger question will be how useful the phones are. For the next few months, devices for Verizon’s network will only be able to use 5G services in select blocks of select cities. It will surf on 4G the rest of the time.

“It will be years before the carriers have upgraded their networks to the point that having a 5G handset will make a material difference in anyone’s user experience,” said Craig Moffett, founding partner at Moffettnathanson LLC.

Still, people who want to quickly download a huge presentation or play a first-shooter mobile game may see advantages to 5G.

Apple may not get punished for waiting. The company often isn’t the first to adopt new technologies, but it’s credited with adding features in a more elegant, consumer-friendly way.

For now, phone manufacturers are fighting for bragging rights. They hope that gaining a reputation for the latest technology helps them sell more products later.

“What are our opportunities to rise again and to be perceived as the best company in the world?” Nafei said. “We thought of 5G as something that would help us restore that position.”

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net, Andrew Pollack

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