Bringing 5G to the factory needs a new approach from telcos

According to ABI Research, 5G will 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. The tech market advisory firm says that by 2026 there will be 5.3 million 5G connections on the factory floor which will generate a revenue of more than US$184 million (with a 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.”

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%. While there are many use cases and areas of application for 5G in manufacturing, targeting the enterprise vertical will fundamentally change the value chain associated with 5G. A much closer collaboration between network operators, infrastructure vendors and manufacturers will be required.

Targeting enterprise verticals, however, is vitally important for communication service providers (CSPs) and the successful deployment of 5G. A recent ROI study conducted by ABI Research has shown that 5G will take approximately 14 to 15 years to break even if it remains solely in the consumer market, versus 10 years if enterprise business models were in place.

“It is, therefore, highly important for network operators and infrastructure vendors to develop new business strategies taking into account manufacturers’ requirements,” Gergs said. “Centrally, this should include moving away from selling connectivity as such, and developing attractive pricing models for additional network capabilities.”

These findings are from ABI Research’s 5G for Industrial Applications application analysis report, part of the company’s 5G Markets research service, which includes research, data and ABI Insights.

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