5G has cut prices again but consumers are not ready

On the first anniversary of 5G commercial use, domestic 5G construction has developed by leaps and bounds in depth and breadth.

Since June, the three major operators and various organizations have successively displayed “transcripts”. For example, in the construction speed of 5G, more than 10,000 base stations are added every week. By the end of 2020, there may be 650,000 5G base stations, covering the prefecture-level cities and some counties and towns. In height, 5G signal coverage has reached the highest peak in the world, Everest.

In addition, as of May this year, the number of 5G package users of the three major operators was close to 100 million, and the shipment of 5G mobile phones was close to 60 million. Although the speed of 5G construction is staggering, these numbers have not had a very intuitive impact on C-end consumers. Users can really feel the changes brought about by 5G commercials in terms of 5G signals, speeds, 5G package tariffs, 5G smartphones, and the core hardware 5G chips of smartphones.

On the eve of 618, in order to further lower the barriers to entry for ordinary consumers to upgrade 5G, the three major operations quietly opened the first wave of price cuts since the commercial launch of 5G.

The wave of price cuts has just begun

The three major operators’ 5G package tariffs are similar in terms of bases and prices, starting at RMB 128 or RMB 129, but the price cuts are slightly different. China Mobile’s discounts are relatively large. Take the 128G 5G personal enjoyment package as an example. The discounted price is 88 yuan, which is close to 40% off. Other gears are similar.

The discount for all packages of China Unicom is close to 30%, and the lowest gear is 129 yuan. The discount for 5G smooth ice cream package is 90 yuan; China Telecom is about 20% discount, and the package of 129 yuan is 103 yuan. It is not just the reduction of 5G package tariffs on the operator’s side. After the opening of 5G smartphone manufacturers in 2020, the war has also spread from the mid- to high-end of 2000-6000 to the price of thousands of yuan.

Huawei Enjoy 20 Pro series, Redmi K30, Redmi 10X series, Honor Play4 series, etc. have become representatives of 5G thousand yuan machines, like Redmi K30, Redmi 10X has dropped to the range of 1000 to 1500 yuan. It is expected that there will be more models in the second half of 2020.

The emergence of the 5G Qianyuan machine marks the maturity of 5G smartphones from technology to supply chain. At the same time, the decline in smartphone manufacturing costs is inseparable from the support of the core component 5G chips. In 2019, manufacturers including Huawei, Qualcomm, Samsung, and MediaTek have successively launched mid-to-high-end positioning 5G chips. Starting this year, 5G chips have entered the low-end market.

MediaTek launched mid- and low-end chips Tianji 800 and 820. Not long ago, Qualcomm launched the 6 Series 5G mobile platform 690 for the low-end market. Following the release of three high-end Snapdragon 865 and mid-range Snapdragon 765/765G 3G mobile platforms at the end of 2019, 5G chips have been improved from high, medium and high , Low coverage of different dimensions.

The 5G chip price war is also fierce. At the beginning of the year, Qualcomm lowered the price of the mid-range Snapdragon 765 chip from US$70 to US$40, which is lower than the cost of the MediaTek Tianji 1000 chip cost of US$45 to US$50. The 5G chip market entered the price-fighting stage half a year earlier.

But at this stage, the price wars of 5G tariffs, mobile phones, and chips are far from deep enough.

There are many restrictions on the price reduction of 5G packages, and the three major operators have set contract periods for discount packages. The staff of China Mobile told Geek Park that the discount package contract period is 12 months, and cancellation of the contract requires going to the offline store to handle and pay the penalty. Upgrading from 4G packages to 5G packages can only replace higher-end packages, not parallel upgrades. For example, the previous 88 yuan 4G package users can only purchase 5G packages above 158 yuan (after discounted 108 yuan), but cannot buy 128 yuan packages (after discounted 88 yuan).

Telecom analyst Fu Liang told Geekpark (ID: geekpark), “Operators’ 5G package discounts and initial policies (30% off for old users and 20% off for new users) are no different. Operators need to further lower the threshold. This year will be There are two waves of price reduction nodes, the upcoming start of freshmen, and the completion of 600,000 base stations in October.”

In addition, there are still more than half of the 5G mobile phone manufacturers who have not launched a 5G mobile phone with a thousand yuan. An employee of China Mobile believes that “the 5G mobile phone has not dropped to less than one thousand yuan, and the era of the 5G thousand yuan machine has not arrived.” And the price of 5G chips plays a crucial role in the pricing of entry-level 5G mobile phones.

People in the industry chain once said, “If the price of chips rises by 40%-50%, then the price of mobile phones will rise by nearly 60%.” JP Morgan data shows that 5G chips are twice the price of 4G chips. Therefore, not only will the tariffs for 5G packages continue to decrease, but in the future, as the coverage of 5G base stations improves and 5G networks improve, 5G mobile phones and 5G chips will have more room to go down.

Looking back on the 4G era, we have roughly experienced the initial high tariffs, speed up and fee reductions, and large-scale user migration in several stages. It took about three years from launch to popularization. Network coverage, telecommunications tariffs, terminal prices, etc. have become important factors restricting consumer migration.

Consumers still want to wait

Currently, the number of 5G packages far exceeds the number of 5G mobile phone users. Only if you have 5G packages, 5G mobile phones, and 5G chips can you be considered a true 5G user. A Huawei wireless product employee said, “4G to 5G, bandwidth from 100M to 1000M, but you need to replace the 5G mobile phone to experience the 5G network, 4G chip does not support. It is estimated that the operator promoted, the mobile phone did not change, the package is changed first.

It can be seen that most users are still on the sidelines and are not in a hurry to upgrade from 4G to 5G networks. Geek Park interviewed several 4G users randomly for different reasons. Some indicated that most of the time they are in the WiFi environment, 4G is enough, and there is no urgent need to replace 5G. Others have just switched to 4G mobile phones, and 4G works well, and they have no intention to change 5G mobile phones in the past year or two. Some are waiting for Apple to release a new 5G machine.

Consumers do not have urgent needs and motivation to upgrade 5G. The more important reason is that 5G has no other advantages besides the faster network speed, which can touch C-end consumers. Wang Jianzhou, the former chairman of China Mobile, pointedly pointed out that 5G networks are being built rapidly, 5G terminals are also increasing, and prices are falling rapidly. However, the development of 5G applications is imminent, and the functions of 5G need to be implemented by applications.

The advantages of 5G are mainly concentrated on the B side, such as the Industrial Internet, the Internet of Things, autonomous driving, and smart factories. The outbreak on the C side depends on when the killer applications appear. In 2010, the first 4G mobile phone in the United States came out, and Uber, video calling, and Snapchat only became popular three years later. At the end of 2013, my country’s 4G was officially commercialized, and short video applications that changed the way people interacted appeared at the end of 4G. The emergence of applications always lags behind.

Moreover, the scale of 5G network construction is far from 4G. In 2020, the number of 5G base stations will only reach one tenth of the total number of 4G base stations. The frequency characteristics of 5G determine that 5G needs to build more and denser base stations than 4G. It will take at least two or three years to build a better network nationwide.

Therefore, early users may often experience poor 5G signals; different regions have different 5G signal strengths; paying 5G package tariffs, but using 4G networks. The user experience is unstable, and the network signal cannot be fully guaranteed. Consumers are destined to have a taste and act as a “white mouse.”

This is also the reason why most consumers want to wait, and are not in a hurry to upgrade their packages or change their phones immediately. The wave of 5G replacements and large-scale user migration will surely come, but not now.

Andrew Beck

Andrew Beck is a 28-year-old writer who enjoys playing football and reading books. He is smart and creative, but can also be very sneaky and a bit lazy.

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