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Traditional telco approach risks hampering 5G development in manufacturing

Adoption of enterprise business models could see operators’ 5G break-even reduced from 14 to 10 years, with especially large gains in manufacturing, says ABI Research

Targeting enterprise verticals early, especially in manufacturing, is vital for communications service providers to successfully deploy 5G, according to a study from ABI Research.

The analyst said that to make 5G a quick commercial success, it is highly important for network operators and infrastructure suppliers to develop new business strategies that take into account manufacturers’ requirements. This, it said, should include moving away from selling connectivity as such and developing attractive pricing models for additional network capabilities.

The company quoted a return on investment (ROI) study, calculating that 5G would take approximately 14 to 15 years to break even if it remained solely in the consumer market, compared with 10 years if enterprise business models were in place.

ABI said 5G would no less than “dramatically” gain importance in providing wireless connectivity to industrial environments, especially in the context of Industry 4.0 and the automation of production processes and monitoring of machine conditions. In its 5G for industrial applications report, ABI estimated that, by 2026, there will be 5.3 million 5G connections on the factory floor, generating revenue of more than US$184m with a compound annual growth rate (CAGR) of 623% between 2021 and 2026.

“As a technology, 5G will be a perfect fit to provide wireless connectivity on the factory floor, since it enables, for example, establishing a massive wireless sensor network or implementing virtual reality (VR) and augmented reality (AR) applications for predictive maintenance and product monitoring. Therefore, 5G offers immense operational benefits and productivity enhancements to the implementing manufacturer,” said Leo Gergs, research analyst at ABI Research.

“Furthermore, the technology opens up new production opportunities by enabling artificial intelligence applications to be integrated into manufacturing processes,” he added.

The analyst also pointed to early 5G trial deployment projects at companies such as Schneider Electric in France and Germany’s Osram, and Mercedes’ hint that bringing 5G connectivity to the factory floor will decrease maintenance costs by 30% and increase overall equipment efficiency by 7%.

The study concluded by noting that while there are many use cases and areas of application for 5G in industrial manufacturing, targeting the enterprise vertical would fundamentally change the value chain associated with 5G. A much closer collaboration between network operators, infrastructure suppliers and manufacturers will be required.

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