Potential value and growth
For this chapter, we invited our futurists at Nokia Bell Labs to explore the effect of 5G and associated technologies on industries, and the impact of the pandemic on the wider economy. Here’s what they found.
COVID-19 has greatly accelerated the need for physical industries to digitally augment. Mature digital industries, such as online retail, media and banking, have been the immediate beneficiaries of COVID-induced demand shifts. This is largely because of their underlying digital infrastructure, a result of several years of strong ICT investment. On the other hand, physical industries, such as manufacturing, utilities and healthcare, have lagged in digitalization, having failed to acquire new and emerging technologies necessary to make their supply infrastructure more resilient, adaptive and responsive to shifting demands.
We expect physical industries to increase their ICT investment and adopt end-to-end 5G technologies extensively in the next decade, thus transforming themselves into augmented physical industries. This transformation will result in a big value inversion – realized through safety, productivity, efficiency and resiliency gains across enterprises, plus creation of new jobs, more employment, higher wages and an increase in revenues for governments. We expect the formulation of this economic equation – catalyzed through what we see as 5G+ enabled digitalization – will increase global GDP by $8 trillion in 2030.
Bell Labs Consulting uses 5G+ as an umbrella term for a broad ecosystem of technologies that will unlock the future economic potential of industry. These technologies include end-to-end 5G, edge cloud infrastructure, private networks, augmented intelligence, automation, sensing and robotics, as well as platform and as-a-service business models. 5G+ is the new enterprise ICT and industrial operations technology (OT) infrastructure, designed to revive latent demands and trigger a new phase of growth across our physical industries.
We expect new ICT spend enabled by 5G+ to grow significantly in the next decade, in keeping with growth in enterprise digitalization. Annual global ICT consumption is forecast to increase from $2.8 trillion in 2020 to $6 trillion by 2030. 5G+ will contribute the lion’s share of that growth; the share of 5G+ technologies and enabled applications and services in the total ICT spend is projected to be $4.5 trillion – or 75% of the total ICT spend – in 2030.
Below, we break down 5G+ enabled 2030 ICT spend into its key components. Edge infrastructure/cloud platforms have the largest share (49%) in keeping with their broad coverage of platform functionalities. While private networks (18%) are virtually on par with AI/ML services (20%) in their proportion of the 2030 spend, they end the year with a higher growth rate indicating a stronger future share of enterprise ICT outlay. Basic connectivity – which includes wide-area mobile-and fixed-network services, and unified communications – comprises a smaller portion of total spend.
5G-enabled ICT spend
Leaders and laggards
The story of digital transformation to date has been one of a widening gulf between leaders and laggards. Physical industries have been slower than digital industries in adopting digitalization systems and platforms that drive efficiency and innovation. This is largely due to the need to deploy new and emerging infrastructure and technologies required to meet the stringent performance needs placed on many of their operations. With several years of strong ICT spend – during which digital industries outspent physical industries 70:30 in spite of having only 25% of the workforce and only 30% of GDP contribution – digital industries have attained a level of digitalization maturity that enabled them to meet the COVID-19 challenge aggressively.
The three categories of digital adoption
The team at Bell Labs Consulting used metrics based on workplace digitalization and ICT spend to classify industries into three categories of digital maturity.
These digital industries are the farthest ahead in terms of their digital maturity. They include communications and media, banking and securities, and insurance.
Physical industries that have achieved a moderate level of digitalization, with strong potential to improve significantly. They include manufacturing, healthcare, transportation, retail trade, education, government and utilities.
Physical industries with low ICT spend and limited automation potential, including construction, agriculture, mining, wholesale trade, live performance arts and entertainment, and accommodation and food services.
These categories both reflect current divides in digital maturity and investment, and provide a lens for discerning future trends, as investment accelerates in the wake of COVID-19.
Investment growth and economic recovery
In assessing ICT investment and the future state of our industries following COVID-19, Bell Labs Consulting identified three phases: the fall, the rise and the new normal. The first of these reflects the near-term decline in investment as enterprises and industries reacted to the economic challenges of the pandemic; the second, a period of accelerated investment expected in the next three years as enterprises seek to expedite digitalization; and the third, a new, steady-state equilibrium.
Journey to a new normal
While overall ICT spend is projected to grow 6.5% annually over the next decade, that investment will be 40% greater in physical industries relative to digital industries. Analysis suggests that, while physical-leading and physical-lagging sectors have experienced a greater fall in ICT spending than their digital-mature counterparts (decreasing 6% and 12% respectively), they will see a more pronounced rise in the years ahead.
2030 will mark a significant value inversion point driven largely by the new transformed augmented physical industries through new ICT/5G+ investments. The historic 70:30 ratio of ICT spend between digital and physical industries will shift to a 35:65 ratio, thereby restoring parity with the GDP contribution of these two sectors.
New value creation
Direct ICT investment of $4.5 trillion towards digitalization of sectors, enabled by 5G+ technologies, will lead to new economic value creation. Higher industrial output and greater business activity throughout the ecosystem will lead to increases in enterprise profitability and government revenues. Greater digitalization also leads to the creation of re-skilled, hyper-augmented jobs and a workforce that commands premium wages, resulting in higher employment and overall income. That $4.5 trillion investment in 5G+ technologies will trigger a concomitant $8 trillion growth in global GDP in 2030, or a 7% increase in overall GDP, measured in terms of workers’ wage growth, enterprise profitability growth and government revenue growth.
As 5G becomes a general purpose technology (GPT) at the heart of the 5G+ innovation ecosystem, it will transform all industries, giving them the ability to meet burgeoning digital demand in a world where consumer habits and enterprise needs are changing frenetically. This will have two fundamental effects: parity will be achieved between the ICT investment and GDP contribution of industries, and value creation will be catalyzed across industries and, ultimately, throughout the global economy.