This article covers:

1. What is 5G?

2. The Fourth Industrial Revolution

3. Why Invest in 5G?

4. How to Gain Exposure to 5G in Your Portfolio

Before investing in any ETFs, you should consult the respective product’s Product Disclosure Statement, which will be available on the fund’s website.

The transition to 5G has created no shortage of headlines – less for the potential it offers, more for the question as to ‘who builds the network’. Nonetheless, the two are intrinsically linked.

To understand why the federal government, along with overseas governments, refused Chinese company Huawei permission to build 5G networks in their respective countries, one needs to understand why 5G is important, and therefore, why it appeals from an investment perspective.

What is 5G?

Fifth generation wireless (5G) is a technology infrastructure system allowing communications and data access on-the-go, much in the same way that previous wireless generations offered. Each generation of wireless network has offered distinct improvements, opening new possibilities.

In the case of 5G, network speeds are significantly faster, touted as being up to 10-times greater. Meanwhile, latency, which is the time it takes for a device to communicate across the network, has dropped by a similar amount. 5G can also support 10-times the number of devices, up to 1 million devices per square kilometre, and is believed to improve network energy efficiency by a similar magnitude.

The roll-out of 5G technology is a focal point in the transformation of the ‘internet of things’. This refers to the nature with which devices can be interconnected to make our lives easier from a personal, to industrial level.

From a personal level, the benefits of 5G may seem relatively obvious. This includes ease of downloads, or having home automation like Google and Alexa connect to everything from the garage door, to your fridge. However, the broader usage of 5G may be considered even more transformative for how we live. 5G is described as the force for the fourth industrial revolution.

The Fourth Industrial Revolution

The fourth industrial revolution refers to how cyber physical systems are expected to drive the next era of industrial reform and change, bringing new efficiencies and opportunities to how we live, and work.

Superfast wireless connectivity can allow for autonomous vehicles with the ability to make split-decision data-based decisions. It also facilitates smart-city applications such as cloud-based traffic control, fully automated warehouse systems, or even the ability for surgeons to operate on patients in another location. In fact, telesurgery has previously been conducted in Italy with a surgeon testing 5G and robotic surgery on a cadaver patient 15km away.

Enhanced remote control via 5G has become even more of a priority in the COVID-era.

From a healthcare perspective, it’s the ability to successfully provide care for patients while maintaining social distancing and isolation procedures.

From a supply chain perspective, it’s the ability to continue to offer online grocery and shopping services to customers, with more employees operating remotely instead of from warehouses.

Why Invest in 5G?

With the world largely moving on from COVID, many businesses will be keen to retain their contingencies to avoid any future disruption. This is where better automation and artificial intelligence fuelled by 5G can play a key role.

Given the potential of 5G, and the role it may play across critical infrastructure, such as hospitals, or business operations from banking to industrial activity, companies involved in the development of the 5G network have a significant competitive advantage. They also effectively have the power to disrupt such infrastructure, or access data.

This led to the media controversy surrounding Huawei, namely, how comfortable are governments with the idea that a foreign state might have potential control and access to their data via the 5G network? In the case of Australia, the US, and the UK, Huawei’s involvement was declined on concerns around the level of access the Chinese government might gain to such data.

In turn, local telecommunications providers were required to find alternative sources for infrastructure and equipment. For example, Telstra and Optus partnered with Ericsson.

All the while, telecommunications company Verizon anticipates that “by 2035, 5G will enable $12.3 trillion of global economic output and support 22 million jobs worldwide”.

While one perspective is to look at 5G as a growth theme for the future, it is also worth seeing the technology for what it will become. Wireless networks are integrated into our lives, and 5G sees that dependency increase further in the immediate future. It is already here, and it is only going to play an increasingly important role over time.

The COVID pandemic prompted some companies to accelerate plans to access 5G-enabled technology, particularly automation, both as a safeguard against future lockdowns, and simply to allow them to continue basic operations in a challenging environment.

How to Gain Exposure to 5G in Your Portfolio

For many investors, investing in telecommunications companies may be first to mind for access to 5G.

However, it may be valuable to look deeper into the 5G supply chain. Given the nature of 5G, it is unsurprising that the 5G supply chain is heavily dominated by tech, robotics, automation, and AI companies.

Naturally, the supply chain features underlying technology suppliers and producers, including companies like Qualcomm and National Instruments, which create specialised chips and semiconductors used in devices to provide access to 5G.  It also extends to companies like Ocado or Daifuku, which create technology and software for industrial automation, robotics, and artificial intelligence. Each of these names are poised to advance substantially from the use of 5G.

Given the vast array of companies set to create for, and benefit from 5G, investing in 5G technology using an ETF like the ETFS ROBO Global Robotics and Automation ETF (ASX: ROBO) can provide broad exposure to the transformative growth of fifth generation wireless. This ETF provides access to the companies that are building for the 5G future, as well as the companies looking to connect with this change.

For more information on investing in 5G, and the ETFS ROBO Global Robotics and Automation ETF (ASX: ROBO), please contact ETF Securities directly using the details below.

To invest in ASX-listed ETFs, or any other ASX, US-listed, or HKEX securities, join Selfwealth today for flat-fee brokerage, and no other account fees or commissions!

ETF Securities Australia Client Services

Phone +61 2 8311 3488

Email: infoAU@etfsecurities.com.au

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