New technologies start costly but become more affordable as adoption grows. With economies of scale, 5G costs will drop, unlocking new opportunities for businesses
The 5G technology is widely recognised for its ability to deliver lower latency, faster speeds and improved connectivity, supporting a vast number of devices simultaneously. However, many consumers perceive 5G as an expensive innovation, primarily due to the high cost of chipsets, while overlooking broader cost factors. Although chipset expenses are a component, they do not represent the complete financial picture.
The Cost of 5G Hardware
When considering 5G, it is common to focus on the price of chips. While 4G chips are priced below $10, 5G chips currently exceed $100. However, focusing solely on chipset costs ignores the larger financial framework. The primary expense of 5G stems from the extensive infrastructure required to support the network. Telecom providers must invest in building new base stations, fibre-optic networks, and antennas to enable 5G connectivity.
Historically, new technologies such as cloud computing and smartphones were expensive when first introduced. However, as demand grew and adoption increased, prices gradually decreased. A similar trend is anticipated with 5G.
The Inevitable Drop in 5G Costs
Technological progress consistently follows a pattern: initial prices are high, but they decline over time. A case in point is the smartphone market, where the average cost dropped from $443 in 2011 to $372 in 2013. Similarly, cloud computing services have become significantly cheaper over the past decade. The same economic principles apply to 5G. As technology advances and adoption rates increase, costs will inevitably decrease.
Economies of Scale and Cost Reduction
One of the key drivers of cost reduction in 5G is economies of scale. As more telecom providers, businesses and consumers adopt 5G, the cost of deployment will continue to decline. The larger the global 5G network, the more cost-effective its implementation becomes. Research by Juniper predicts that global 5G connections will surge from 5 million in 2019 to 1.5 billion by 2025.Mass production plays a crucial role in reducing costs.
Increased production volumes lead to lower prices for 5G hardware, including chips, antennas, and base stations. The 5G base station market is expected to grow from $37.44 billion in 2025 to $132.06 billion by 2030, at a CAGR of 28.67 per cent, according to Mordor Intelligence. These massive investments will drive economies of scale, further lowering the cost of private 5G network deployment for businesses.
Affordable 5G Handsets and Private Networks
The competition in chipset manufacturing is already pushing down 5G handset prices. As these prices drop, the overall cost of related hardware and services will follow, accelerating global 5G adoption.
5G’s Impact on Business
As 5G technology becomes more affordable, businesses will have greater opportunities to enhance their operations. While early adoption may come with higher costs, the long-term benefits will far outweigh these expenses. 5G’s ultra-fast connectivity and real-time data transfer capabilities will drive productivity, streamline processes, and facilitate better decision-making.Furthermore, 5G can revolutionise industries by enabling advanced applications in customer service, video streaming, and mobile capabilities.
The Future of 5G Affordability
As adoption scales up, deployment costs will decline, making 5G a more democratised technology. This affordability will allow businesses of all sizes to embrace 5G, fostering innovation in artificial intelligence, augmented reality, and beyond. The widespread availability of 5G will enable businesses to stay competitive in the digital world.
(The writer is Founder & CEO, Echelon Edge Pvt Ltd; views are personal)
