Welcome To episode 155 of the G two on five G. It's the latest scoop on everything, five G. We cover six topics in about 20 minutes, and it's brought to you by more insights and strategy. I'm Will Townsend. Joining me again this week is fellow analyst anal sag. Let's get started with my first topic, and this is something that both you and I anal caught wind of this week, but T-Mobile announced that it is the first to offer five G network slicing beta resources to application developers.

Network slicing is something that you and I have talked about for years on this podcast, and you have to have five G standalone to do it. T-Mobile has the first five G standalone network in the world, others are following. This is from my perspective it's potentially very disruptive because it's gonna give developers a test bed.

To develop next generation applications. And just for a recap on what network slicing is, it's a way to basically take a virtual slice of a physical network and fine tune things like throughput and latency, less about device support to really align it to a specific application. So it's a big deal.

I laid it out there, but why don't you jump in and provide some insights to our listeners and viewers. So 

this announcement specifically is one in an announcement of their beta program, but also that they have a five G network slice specifically for video already in place. Okay. And they're already working with Dialpad, Google WebEx, by Cisco Zoom, and others to create this video calling application layer.

It's gonna be one of many, I believe. But I think what will happen is this will create a specific layer in their network where you can be guaranteed a certain layer of the network for a certain amount of service. And it will potentially solve a lot of the problems that we're having with, doing Zoom while you're on five G.

And it could actually be a huge boost for things like video calling. Which, a lot of people already are doing quite a bit of, but when you look at where it's happening, it's almost entirely happening at home. Yeah. Because so many cellular networks really don't do a very good job of handling that video traffic.

Mostly because it's real-time video traffic and it's bi-directional. And, there are certain things that are necessary to make that traffic work well. You know when someone's on a five G connection or even a four G connection, you can already tell that they're no longer on wifi. So I think video's a great first place to start.

I think we're gonna see a lot of progress happen there quickly, and they're gonna move on to new applications and we'll see maybe more developers taking advantage of this, maybe doing. Another layer for holographic collaboration. Next, next level video collaboration. But I think this is a big deal and obviously T-Mobile as the world leader in five g i, I think it's no surprise that they're first ones to really do this.

Yeah. And what I like about this is that it builds on its developer program that it's announced. It's been about a year now. And so they're providing tools, they're providing access, through their experience centers, and the, their competitors at and t and Verizon and the us offer similar, test beds, lab resources and that sort of thing, but just this sort of follows on and builds upon.

What it's already announced to support the developer community. And we've seen some really innovative applications come out of T-Mobile's think tank, if you want to call that. We've talked about pano ai and, early detection of firefights and, just in Bastrop where I'm living now we had our first wildfire of the season.

And, it's concerning. Being able to lean into things like AI and five G and edge computing is very compelling. And so I give props to T-Mobile for, providing this network slicing of beta resource to, to drive innovation. But let's move to your first topic and Qualcomm reported earnings not the best to date.

But you also wanna talk about, more Huawei five G rumors. Yeah, 

so they reported earnings. They said that they had revenues of about seven 2.2 billion with a murky E P ss of one a dollar 60 sorry. I'll say their total revenues 8.5. Then e p s is a dollar 60.

All that's midpoint guidance. So they didn't beat anything. They don't really feel like they necessarily missed on anything. But what really happened is that they saw their revenue drop 23% and they saw their earnings before taxes dropped 38%. And then e p s dropped 37%. A lot of this happened in the previous quarter.

So we already saw the smartphone slump happen in Q two. Yeah in fiscal Q two, whatever. But basically their fiscal quarters are completely unaligned from the calendar year. So they're actually reporting Q three F y 23 numbers for q two. And then they also showed chip revenue was down 24%.

Earnings were down 42% for their chip business revenue in Q T L, which is our licensing business, was down 19% and their earnings before taxes were down 25% in there as well. And I have a feeling that their reduction in their licensing may be coming somewhat from no Huawei licensing revenue.

Or a reduction in huawe licensing revenue because there's a rumor that Huawei might be going on their own with five G again. Interestingly, automotive was up 15 per, or automotive was up 13%. So it's a bright spot in their earnings. Yeah. But overall it was really interesting 'cause they were saying how they believe that some of these figures will improve as Apple launches a new device and they will still have.

Pretty good market share with an apple. They didn't make it clear that they'll have complete market share, so there might be something going on there, but really the Huawei one is really interesting to me because it may be validating the rumor that Huawei may be going out and doing their own five G modem.

I've seen some stories saying that they might be using SS M i C or Esic for that a seven nanometer D U V, not e U V. But that process may not actually be mature enough to actually supply Huawei, so who knows? But it does sound like the Walway rumor may be getting a little bit more legit and that Qualcomm is getting hit pretty heavily by the.

Slump in China as well. The interesting thing is media tech's earnings were also pretty bad, but they didn't get hit as badly as Qualcomm. And there were some people on the call asking, why is media tech going down, 8% sequentially and. 50% year over year. But overall both companies are getting pretty hard 'cause the smartphone industry's slowing down and China's recovery isn't coming as quickly as it is in, say, the US or other markets.

That's interesting on the rumors around Huawei and they're doing a five G modem and I, I didn't, I haven't picked up on that, but from your perspective, is this. Huawei taking their designs from high silicon to a contract manufacturer in China, or is this Huawei?

Doing their own silicon ground up. I 

would expect it's gonna be still high silicon. 

Yeah, that's what I would think as well. So that's interesting. And so what could be in play here is a reverse, the, a lot of the Chinese, infrastructure companies and Huawei in particular have been entity listed.

And and so now that's beginning to materialize in the form of lower earnings for both. Qualcomm media tech that really lead the charge with respect to five G modems and devices, right? Yeah. Yeah. Interesting. Let's move to my second topic and I wanna talk about at t. And so we've talked about REDCap, which is five G, reduce capacity, pardon me, that was my Bluetooth speaker.

No disconnected. But but at t conducted its first five G IOT data call with five G reduced capacity. And At a high level the details around this are this was done in the field on a live five g standalone network. Obviously at and t is still in the midst of deploying five G standalone on a, more broad basis.

But where REDCap really fits in is straddling the position between very high capacity performance on five G networks and very low capacity and low power like Alan for i o t. And this tweener capability might present some very interesting use cases for edge connected devices.

And iot in particular, but I don't know if you caught the news. What do you 

think? I did catch the news for some people five G REDCap is synonymous with NR light. They're interchangeable tech terms and our light I is, it was the old term I think a lot of people were using. But what I'm curious about is what devices they were using and it looks like they were using media tech.

Most likely for the modem side. And Nokia probably provided some of the network capabilities. Yeah. So yeah, it looks like it's on the media tech red cap. So it's interesting that they tested it on a media tech platform and not a Qualcomm platform. Yeah. But that's, I think that bodes really well for media tech in terms of what their red cap capabilities are because they weren't the first to announce a product, but they're clearly, operating within.

Real network live trials. So I think that's great news for media tech. And yeah, it'll be really interesting to see, how this develops long term. 'cause it's very much an iot play. Yeah. And I think that's important for people to understand that red Cap is great for enabling low cost, low data rate applications for five G that might still benefit from latency.

And the benefit there is not having a bifurcated networking strategy. So today, lo Wan is actually doing quite well. I read some news, although I don't have a topic prepared on Lo Wan today, but they're seeing some market acceptance in Europe and that sort of thing. Laura Wan as a standard, has been out for several years.

It's finally beginning to catch some steam and there's. Some applications that are very sustainability focused around monitoring things that are related to like water quality and that sort of thing. But, the challenge there is that it's a different, network protocol.

Five g one of its superpowers is massive device support. And so I think five G REDCap are, five G reduced capacity. In our light to your point provides an opportunity to manage things, in a similar domain. But yeah, it'll be interesting to see how, kind of things turn out from this regard.

But you mentioned Nokia, so that's a nice segue to your second topic. And I actually tuned into the live cast today. It was at 1230 Central, so that would've been 10 30. West Coast time for you and Peka, their c e o was there along with I believe Kamala Harris the, our vice president. And they were talking about basically a new venture that's gonna allow Nokia to manufacture fiber optic networking electronics within the United States.

So I'm gonna let you take 

it. Yeah. So Noki partnering with O D M Sanmina, And they are basically taking some of this bead funding, which is a $42 billion program for manufacturing broadband equipment in the us. And my understanding is there'll be manufacturing electronics and modules for broadband fiber technology which most likely will be used in US government facilities as well as within the US in places where they might be doing rip and replace.

So it'd be really interesting to see how this builds out and how it affects cost profiles. But hopefully this, subsidization of this facility in, I believe it's Indiana will, Wisconsin. Wisconsin. Wisconsin. Yeah. I saw a different thing for Indiana, so Wisconsin. And I think, obviously bringing jobs to Wisconsin as well was probably the Kamala Harris angle there, right?

I think we're seeing more and more companies being incentivized to come back, manufacture in the us. Keep jobs here. I'll be honest with you, I don't really think jobs are actually the primary goal because any modern manufacturing facility in the us can be operated with considerably less human beings than highly automated.

It was five or 10 years ago. And that's the only way to make those things profitable. So I think it's less about jobs, it's more about supply chain and guaranteeing secure supply chain for these things. Obviously jobs will be created and there's a supply chain involved with that.

And usually when a manufacturing facility gets spun up, they, the suppliers usually come into town to keep them supplied. So hopefully that brings more jobs in a in an, maybe more Ong in a way. But hopefully this is a net positive for Nokia and the rest of the industry.

So I 

agree with you. So I think this is less about, job creation and more about supply chain domesticating, the five G supply chain so that the US is not reliant on even European companies to do this, like Nokia. And so Nokia partnering with Samia domesticates the fiber optic components.

That are basically the building blocks for backhaul for mobile networks. So I think this is a domesticate, the supply chain thing. This is buying the U s a and that's one of the requirements of this bead funding, this huge pot of money. There are stipulations that a lot of the supply chain has to be domesticated here So I think, Nokia is wise, to make this investment.

Certainly it's gonna require a lot of, investment and resources on their part to do this in the United States. But I think, in the long term it can, it could pay, huge dividends for the company. And, they are, Nokia is recasting itself as an enterprise service provider and.

Certainly doing this and, providing fiber optics and fiber electronic components domestically could be a big boon for them. So 

time will tell. I was just gonna add wall Street Journal says they're gonna, Add 200 jobs to the state of Wisconsin and they would expect production to start, or products are expected to start in 2024 

yeah. So it's definitely next year. And yeah, so that, that really validates our point. This is more about supply chain efficiencies and adjacencies than it is job creation but it's good for the state of Wisconsin, When you look at the Rust Belt, when you look at that part of the country we need to bring more high tech there.

And certainly companies like Intel opening Fabs in the Midwest are helping to that, to, to that end. But let's go to my third and final topic this week and I wanna talk about Rakuten and Rakuten Symphony in particular. They signed an o ran deal with a Ukrainian operator, and this is all aimed at rebuilding critical telecommunications infrastructure with five G in Ukraine.

I found it interesting. So the mobile network operator is Von Yep. And this is gonna employ open ran and symphony taking its learnings from its deployment in the Japanese market with o Ran and disaggregated infrastructure to to set up five G networks very quickly and very cost effectively.

And I've been, on the fence about Rakuten Symphony. Here's a mobile network operator that spun off all of its learnings from its bloodied nose in the Japanese market to help other mobile network operators stand up, open ran. Deployments. And hey, this is a validation that symphony is hitting and and certainly this isn't the first win that Symphony has registered, but this is part of a $600 million project, to build, to rebuild Ukraine's critical infrastructure when it comes to telecommunications.

And when you look at the average cost of deploying, a five G network that's in the billions of US dollars or euros. That might not seem a lot of, like a lot of money, but it's a critical start and, getting Ukraine, back on the grid is gonna be critical in its efforts to rebuild itself in the wake of what Russia has done there.

But I'm sure you saw the news and I'm sure you've got some opinions to weigh in on here. 

Yeah, I think it's a good thing for both the Ukrainians and for Rakuten because, Ukraine's infrastructure isn't really in the greatest state right now due to all the attacks and invasion.

Yeah. And I think that this is a good opportunity for them to modernize their infrastructure in a way that is flexible and gives them room for expansion. And I think that this might be another one of those blessings in disguise where Ukraine rips out, equipment from other vendors. That maybe wouldn't be very friendly to western companies and western business.

Yeah. And may now be able to service, more western. Companies to come into Ukraine and offer their services and applications and help the company country grow. A good example of that is actually the railroads in Ukraine. They were previously built with Soviet standards to. Basically match what Russia has and by Russia destroying all of the rail or so much of the country's rail, they're gonna be forced to replace a lot of it.

And then they're probably not gonna be replacing it to the Russian standards. It's gonna be really interesting to see how. Ukraine's infrastructure gets recast as a result of this war and where those, where that funding comes from? Obviously war's not over yet. I think far, but there's, they're clearly not wasting any time trying to modernize the company or country's infrastructure to maximize its rebound.

Yeah. 

You can argue because I have a good friend that was living in Kyiv before the the invasion started. And the infrastructure was not up to snuff, to your point. It was based on Russian standards. And so there's been a lot of, news lately about, all of the armament that, the west has been, sending its way and its defense against Russia.

But, this is an opportunity for Ukraine to really uplevel. It's it's telecommunications infrastructure and to modern, to modern times. And, as we have witnessed over the years, ubiquitous access to the internet provides opportunities for digital inclusion, sustainability, economic prosperity, and this could really help.

Ukraine, rebuild very quickly versus just sending them a check, which, I think they've been on the receiving end of a lot of funds. But, bringing experts in here, Rakuten has significant experience in building these highly disaggregated CapEx and opex optimized networks.

And so I think it's a great fit. So it'll be interesting to see what happens. We'll, we can continue to monitor this and, bring this back on future podcast episodes. But let's go to your third and final topic. You wanna talk about Gogo and they provide internet connectivity while we are all in the air, and it sounds like they've pushed their five G launch back yet again, right?

Yeah. So basically what's happened is somehow, yet again, there has been a. An issue with how their five G chip set was designed. If you recall I look back, it was about six months ago. We talked about a delay due to a design flaw and their five G modem. And originally they were blamed. They were blaming I wanna say Samsung for the fabrication issue, but now it says that they've announced another delay.

Due to a design error and a non five G component of its chip, which was designed by a third party subcontractor of its five G solution provider. Yeah they are gonna be forced to push it back to mid 2024. The last update we were supposed to get at the end of 2023. So this looks like another six month delay.

The really messed up part is, I didn't even realize this until I was reading one of the light reading articles by Mike Dano. It was in 2019, they announced it was gonna be a 2021 project, so they're gonna be three years late to delivering five G. Due to a multitude of issues, including multiple chip problems.

So don't ever say, you can just. Build a chip and it'll work great. I have a feeling that if they went with a commodity product, it would've cost them more, but they probably would've been in market earlier. Yeah, they have taken a, 20% hit to their stock. But this, the good thing is they've also announced a much smoother upgrade path for business jets and other airliners so they can quickly upgrade their equipment to a five G capable box.

For a meager $150,000. But the interesting thing is this service at its best will offer a 75 to 80 megabit experience with an average of 25 megabits. And then they're also going to be offering a low earth orbit solution in 2024 as well. That will pair with this for international travel.

So we're gonna see some really interesting stuff coming from Gogo in the aviation space in 2024 if they don't have any more delays. 

Yeah, so I think, I think Leo they may have to scrap the whole, roadmap there, within Gogo because just to let our viewers and listeners know, I will be publishing an update to my first article in mid-June around low earth orbit satellite in the space race there.

So there's some promising details coming. I can't share that at this point, but likely by mid next week, I'll be talking about this on our next podcast, but I think Leo is definitely the future when you think about distance and latency and throughput and, 20, 25 down, it's just not usable.

And, I've never been happy with the Gogo service when I, I. Decide to pay for it on flight. So things need to change there. Just like airport connectivity, but I know that's an area that companies like at and t are working on, like at Dallas-Fort Worth airport. But I acqui ask way too much.

It's been another great podcast, my friend. Why don't you take us home? 

Absolutely. We hope our viewers and listeners found this week's topics interesting. If anyone out there would like to provide insights on a specific five G topic for a future podcast, please reach out to us on social media. Wills at Will and Amit on.

We hope you have a great weekend and please tune again next week and don't forget to rate us and subscribe.