Deloitte releases its predictions for the UK technology, media and telecoms sector trends for 2019
Every year business advisory giant Deloitte, announces its predictions for the UK TMT sector that new year. I have to say, they are pretty accurate so worth paying attention to if you work in this sector. This year we see the launch of the eighteenth edition of Deloitte’s TMT Predictions 2019 report. You can download the full report yourself, buckle up and prepare to see the future (in great detail) or read our selected highlights below. No, they don’t know how you are going to die but if you ask again, I will be able to tell you, with great confidence!
This 18th edition of Deloitte’s Technology, Media & Telecommunications (TMT) Predictions presents a fascinating array of trends, each developing at its own momentum, which will impact UK businesses and consumers in 2019 and beyond. Many milestones will be reached this year. Progress will be exponential in some fields. But in other areas the way in which we live and work may shift imperceptibly. Based on conversations with over 100 industry executives and more than 10,000 online interviews with members of the public, our endeavour is to provide a considered point of view on key industry trends. This year’s TMT Predictions explore 8 topics, from smart speakers and 3D printing, to 5G and radio.
Based on conversations with 100+ industry executives and 10,000+ online interviews with members of the public, discover what TMT trends we predict will have the biggest impact in 2019 and beyond #DeloittePredicts
For those of us based in the UK, there is one great big stinky factor we cannot avoid when thinking ahead, Brexit and WTF is going to happen. the brains at Deloitte have of course factored that in but can offer us absolutely no comforting or enlightening words on this so I guess we all just do what we were doing anyway and grind our teeth and dream that we are governed by people whose first priority is our welfare. Imagine that! No, I know it is hard as it’s so unrealistic but it’s more helpful than banging your head against the table.
Our predictions of the major TMT industry trends could, of course, be impacted by Brexit developments. There remains a high level of uncertainty in relation to Brexit, and how it will impact the TMT sector. At the time of writing, the meaningful vote in the UK parliament to ratify the Withdrawal Agreement (governing the legally binding terms of the UK’s exit) and the Political Declaration (the brief summary of the intent of the UK and the EU in terms of future relations) has not taken place. If the deal passes, there remains significant uncertainty as to what the future EU/UK relationship will be beyond the transition period, and how this will impact on business. If the deal is rejected, what happens next is unclear; however, the possibility of the UK leaving the EU without agreed terms (the ‘no-deal’ scenario’) would likely increase given it is the default option if nothing else changes by 29 March.
OK, here we go, our selected highlights from the report.
5G: The New Network Arrives
2019 will see the first mass-market generation of 5G-enabled handsets go on sale. Deloitte predicts that around 20 handset vendors will launch 5G-ready handsets in 2019, with the first available in Q2. Approximately one million 5G-enabled handsets will be shipped by the year’s end, out of a projected 1.5 billion smartphone handsets which will be sold in total in 2019. In the UK, 5G shipments will number around 50,000.
“The introduction of 5G handsets expected this year will look a lot like 2010, when 4G phones first entered the market. There will be a lot of noise in the first year from vendors vying to be first to market, and relatively little action from consumers. We’re not talking about an overnight switch to faster connectivity with lower latency, we will see 5G used by consumers in hotspot locations in the next two to three years, with mass adoption by 2025.” Dan Adams, head of telecommunications at Deloitte
- 2019 will be the year in which fifth‑generation (5G) wide‑area cellular mobile networks arrive at scale, with 25 operators around the world expected to have launched 5G services in at least part of their territory (usually cities).
- A further 26 operators should launch (again with the focus on cities) in 2020. In the UK, all four operators (EE/BT, Vodafone, O2 and 3 UK) are planning to launch 5G services between 2019‑20. It will be many years however before 5G rollout is complete.
- Approx. 20 handset vendors will launch 5G‑ready handsets in 2019 (with the first available in Q2).
- Approx. 1 million 5G handsets (out of a projected 1.5 billion smartphone handsets sold in 2019) will be shipped by year-end. UK 5G smartphone shipments may total about 50k, and in 2020 will range between 2‑3 million.
- One million 5G modems (also known as pucks or hotspots) will be sold, and around a million 5G fixed cellular mobile access devices will be installed.
- At the end of 2020, we expect 5G handset sales (15–20 million units) to represent approximately 1% of all smartphone sales, with sales taking off in 2021, the first year in which retailers will sell more than 100 million 5G handsets.
5G is the connectivity technology of the future – even if its adoption curve may be relatively shallow in the next 12 to 24 months. It will likely take years for 5G to replicate 4G’s marketplace dominance #DeloittePredicts
What are the three major applications of 5G wireless technology in 2019 and 2020?
- 5G will be used for truly mobile connectivity, mainly by devices such as smartphones.
- 5G will be used to connect “less mobile” devices, mainly 5G modems or hotspots: dedicated wireless access devices, small enough to be mobile, that will connect to the 5G network and then connect to other devices over Wi‑Fi technology.
- Finally, there will be 5G fixed‑wireless access (FWA) devices, with antennas permanently mounted on buildings or in windows, providing a home or business with broadband in place of a wired connection. In the UK two operators may launch FWA services in
2019 or 2020.
Will 5G impact 4G rollout?
5G spend may simply replace prior spend on 4G rollout. One study predicted that 5G might cause capex to jump from 13% to 22% of revenue for only a limited rollout. But as 2018’s field trials progressed, many operators in North America, Europe, and Japan re‑evaluated cost and releasing public guidance that capex intensity for 5G would be more or less flat with their 4G spending.
As far as spectrum goes, early signs are that operators’ spectrum costs will be closer to the 4G experience than the 3G. Based on some early auctions, the prices for 5G spectrum, depending on the frequency band, are consistent with those for 4G spectrum: all auctions in the six countries in figure 3 have been for less than £0.16 MHz pop, and two were under a penny. In the UK the price for 5G spectrum is £0.13 MHz pop.
5G is the connectivity technology of the future – even if its adoption curve may be relatively shallow in the next 12 to 24 months. It will likely take years for 5G to replicate 4G’s marketplace dominance, in the same way, that it took several years for 4G to displace 3G.
Artificial Intelligence: From expert‑only to everywhere
“The trouble with AI, however, is that to date, many companies have lacked the expertise and resources to take full advantage of it.”
The key trends that Deloitte predicts for Artificial intelligence:
- In 2019, companies will accelerate their use of cloud-based artificial intelligence (AI) software and services.
- Among companies that adopt AI technology, 70% will obtain AI capabilities through cloud-based enterprise software, and 65% will create AI applications using cloud-based development services.
- By 2020, penetration rates of enterprise software with integrated AI and cloud-based AI platforms will reach an estimated 87% and 83%, respectively, among companies that use AI software. Cloud will drive more full-scale AI implementations, better return on investment (ROI) from AI and higher AI spending. Importantly, we will see the democratization of AI capabilities – and benefits – that had heretofore been the preserve only of early adopters.
What is AI?
AI consists of multiple technologies. At its foundation are machine learning and its more complex offspring, deep-learning neural networks. These technologies animate AI applications such as computer vision, natural language processing, and the ability to harness huge troves of data to make accurate predictions and to unearth hidden insights. The recent excitement around AI stems from advances in machine learning and deep-learning neural networks – and the myriad ways these technologies can help companies improve their operations, develop new offerings, and provide better customer service at a lower cost.
Why aren’t companies taking full advantage of AI?
The trouble with AI, however, is that to date, many companies have lacked the expertise and resources to take full advantage of it. Machine learning and deep learning typically require teams of AI experts, access to large data sets, and specialised infrastructure and processing power. Companies that can bring these assets to bear then need to find the right use cases for applying AI, create customised solutions, and scale them throughout the company. All of this requires a level of investment and sophistication that takes time to develop and is out of reach for many.
What are the benefits to investing in AI and which companies are taking full advantage?
For the reasons above, AI’s initial benefits have accrued mainly to pioneers with the required technical expertise, strong IT infrastructure, and deep pockets to acquire scarce and costly data science skills – most notably the global “tech giants.” They have the resources to engage in bidding wars for increasingly expensive AI talent. They have also invested billions in infrastructure, including massive data centres and specialised processors. For example:
- Google has designed its own AI-specific chips to accelerate machine learning in its data centres and on IoT devices.
- Amazon has used machine learning to drive recommendations for many years. The company is using deep learning to redesign business processes and to develop new product categories, such as its virtual assistant.
- China’s BATs – Baidu, Alibaba, and Tencent – are investing heavily in AI while expanding into areas previously dominated by US companies: chip design, virtual assistants, and autonomous vehicles.
- These tech giants are using AI to create billion-dollar services and to transform their operations. To develop their AI services, they’re following a familiar playbook: (1) find a solution to an internal challenge or opportunity; (2) perfect the solution at scale within the company; and (3) launch a service that quickly attracts mass adoption. Hence, we see Amazon, Google, Microsoft, and China’s BATs launching AI development platforms and stand-alone applications to the wider market based on their own experience using them.
Joining them are big enterprise software companies that are integrating AI capabilities into cloud-based enterprise software and bringing them to the mass market. Salesforce, for instance, integrated its AI-enabled business intelligence tool, Einstein, into its CRM software in September 2016; the company claims to deliver 1 billion predictions per day to users. SAP integrated AI into its cloud-based ERP system, S4/HANA, to support specific business processes such as sales, finance, procurement, and the supply chain. S4/HANA has around 8,000 enterprise users, and SAP is driving its adoption by announcing that the company will not support legacy SAP ERP systems past 2025.
A host of start-ups are also sprinting into this market with cloud-based development tools and applications. These start-ups include at least six AI “unicorns,” two of which are based in China. Some of these companies target a specific industry or use case. For example, Crowdstrike, a US-based AI unicorn, focuses on cybersecurity, while Benevolent.ai uses AI to improve drug discovery.
The upshot is that these innovators are making it easier for more companies to benefit from AI technology even if they lack top technical talent, access to huge datasets, and their own massive computing power. Through the cloud, they can access services that address these shortfalls – without having to make big upfront investments. In short, the cloud is democratising access to AI by giving companies the ability to use it now.
“There are likely to be multiple, specialised areas where 3D printing is highly competitive and suited to needs. One such example is bionic prosthetic limbs for children.”
The key trends that Deloitte predicts for 3D printing:
- 3D printing’s growth phase is likely to return in 2019. We predict that sales related to 3D printing by large public companies—including enterprise 3D printers, materials, and services—will surpass £2.1 billion in 2019 and £2.4 billion in 2020.
- This area of the industry is poised to grow at approximately 12.5% in each of those years, more than double its growth rate just a few years ago.
Why is 3D printing on the rise now?
3D printing, also known as additive manufacturing, was heavily hyped in its early days. In 2014 industry revenues of £1.6 billion were twice 2009 revenues. But industry revenue growth in 2015 and 2016 slowed to a mere 5% per year.
3D printing is experiencing the predicted inflection because companies in multiple industries are using it for more than just rapid prototyping. 3D printers today are capable of printing a greater variety of materials. There is more 3D printing in metal and less plastic printing. Plastic is fine for prototypes and certain final parts, but the trillion-dollar metal-parts fabrication market is the more important market for 3D printers to address.
Between 2017 and 2018, an industry survey showed that plastic was the most common material, but its share in 3D printing fell from 88% to 65% in one year, while the share of metal printing rose from 28% to 36% #DeloittePredicts
Between 2017 and 2018, a 3D-printing industry survey showed that, although plastic was still the most common material, its share in 3D printing fell from 88% to 65% in just one year, while the share of metal printing rose from 28% to 36%. At that rate, it seems probable that metal will overtake plastics and represent more than half of all 3D printing as soon as 2020 or 2021.
3D printers create objects faster than they used to, and they can print larger objects (build volume). Building a part one ultrathin layer at a time is an inherently slow process. But printers are getting faster. While print time does vary by the complexity of the shape being made, the quality of the print job, and/or the materials being used, the 3D printers on the market in 2019 are twice as fast, broadly speaking, compared to 2014 models.
A few years ago, a typical high-end metal printer could only build an object that was smaller than 10 x 10 x 10 centimetres, or a cubic litre. In 2019, multiple printers are available with a 30 x 30 x 30-centimetre volume, or nine cubic litres.
Print time varies by the complexity of the shape being made, the quality of the print job, and/or the materials being used, but the 3D printers on the market in 2019 are twice as fast as in 2014 #DeloittePredicts
What will this mean for traditional manufacturing?
3D printers are unlikely to replace traditional manufacturing techniques, as in many cases 3D printing—is still more expensive per part than using traditional machines. 3D printers are also far slower taking hours per part instead of minutes (again excluding finishing and post-processing of various kinds).
There are parts that can only be made with 3D printing, as well as situations in which part volumes are so low that neither traditional nor subtractive manufacturing is optimal. These are the markets that are driving some of the growth that we predict for 3D printing.
What’s next for 3D printing?
There are likely to be multiple, specialised areas where 3D printing is highly competitive and suited to needs. One such example is bionic prosthetic limbs for children. Providing these for children is highly costly, not just because of the base price (about £10,000), but also because of the need to replace these frequently as children grow. In the UK this has meant that few children under nine years old would be offered a bionic hand. Lower cost prosthetics are available. For example, a hook would cost about £600, but this often leads to the child being teased. A 3D-printed hand, offering equivalent functionality to a traditional bionic prosthetic, may cost a mere £20. Further, this hand could be readily customised, featuring the colours of a child’s favourite pop group or football team.