I read a McKinsey report on beyond 5G today, and I'll report some general takeaways.
This topic is kind of my line of work, and I have been involved in the initial 5G technology standardization and use case studies since a long time ago. I deeply realize the uncertainty of this report. The main point is that most players do not have a clear strategy on how to capture value, and there is a high probability that even if they succeed in driving new use cases, the value will be realized mainly in the related industries rather than in the company itself. In addition, the upfront cost is very large, in fact, if there is no major competition, most companies should not have enough motivation to invest a lot of resources. And the main competition is only in some advanced countries (U.S., Japan, Korea), China is mainly government forces and financial support.
It is interesting to note that the report categorizes the technology section into advanced and frontier, where advanced is closer to the existing technology with improvements, and frontier is fundamentally different. For example, the low and medium frequency part of 5G technology, short range technology (BT, RFID) and LPWAN technology are all technologies that have been introduced since the previous generation but have not yet reached their full potential, while the frontier is technology that is very new or even not yet fully mature, such as high frequency 5G technology and LEO satellites. Frontier technologies require a lot of money to build, but only contribute about 20% of the currently expected value. Of course, their main potential is the economic benefits that we cannot yet predict, such as the possibility of opening up entirely new applications and markets, which are also difficult to estimate and very risky. But this part is also very risky because it is difficult to estimate.
In a previous post we talked about the history of LEO satellites, and in the history of LEO we saw that the investment failures of the 90's resulted in two decades of silence in the satellite industry. No one knows if it will be more successful this time, all we know is that the stakes are high.
Regarding the business value estimation model, the report points out that the global estimate of each industry can show a GDP growth of 1.5~2 trillion by 2030, of which 80% can be driven by advanced technology. This figure is about 3.5~5.5% of growth for each industry, and if we add the indirect benefits of population connectivity (e.g., increased productivity of the African population due to the widespread use of the Internet), then we estimate that there will be another 1.5~2 trillion of growth. If this figure is accurate, we can only estimate a growth of 5.5% in 10 years, plus the more difficult to estimate global growth of around 11% in various industries, or an average GDP growth rate of 1.1% a year. In fact, I personally believe that the benefits of population connectivity can be gradually promoted even without newer technologies. After all, regions that are more backward will eventually begin to use existing technologies as long as they are given enough time and resources, but the amount of growth that can be realized depends on local acceptance, which may have a greater correlation with the strengths and weaknesses of the local economy.
In terms of connectivity, if there are no newer industry trends, even if many "fresh" use cases such as industry 4.0 are considered, the contribution to the growth of the global economy will still be limited and not enough to create the next wave of explosive growth. After all, what can be quantified by the existing model is inevitably a re-development of the existing industrial model, and the Internet has already driven a lot of new momentum in the past two decades, so there is naturally limited room for further enhancement now. I think we should look forward to the next few years to see if new, hard-to-quantify product directions or other technologies can create truly new applications and new consumer needs.
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