The automotive industry is experiencing tremendous disruption due to accelerated demand for electric vehicles (EV), new platforms and services, and sustainable manufacturing practices. Carmakers are upgrading existing manufacturing facilities and building new factories to support sustainable EV vehicle production combined with maturing internal combustion engine (ICE) vehicles. With these upgrades, carmakers developing new capabilities, such as EV battery and power-train production, are implementing targeted Industry 4.0/smart manufacturing capabilities to enable data management, robotics and automation, and real-time monitoring and control. These capabilities require robust network connectivity. Today fixed connectivity is typically favored as the primary connectivity for non-mobile assets. Wi-Fi is used in some cases for mobile equipment and backup connectivity for non-mobile assets. 5G is gaining some traction in automotive manufacturing facilities, which we expect will accelerate as private 5G networking matures and 5G becomes better aligned with the specific use-cases for automotive manufacturing.
Dynamic network slicing has been a 5G service capability from the earliest days of 5G development. The slicing concept is relatively straightforward. Instead of a traditional 'one-size-fits-all' approach towards resource allocation, network resources are dynamically allocated using virtual networks optimized for individual services. For example, a network slice (i.e., virtual network) to support IoT might have sparse 5G core resources and no handover functionality but massive connectivity demands. In contrast, a mobile broadband slice is likely to require extensive 5G core resources, fully-featured handover capabilities, and support high data rates.
While it is possible to speculate 5G revenue opportunities for mobile operators, the reality is that nobody knows how the market will develop. Industry spectators have wide-ranging expectations from the pessimistic "glass-half-empty" to the optimistic "glass-half-full." While both the "half-empty" and "half-full" camps have some efficacy, at Tolaga we fall into a third camp, where the "glass" is the wrong size. We believe that instead of focusing on the reassurance of speculative 5G revenues, investors should seek solace that mobile operators are investing in the right places to prepare themselves for 5G revenue opportunities as they emerge.