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Sources: Apple mobilizes suppliers to launch first 5G iPhone range

Aggressive sales targets for the premium 2020 models will also spur 5G rollout globally

Apple will be the last of the world's top three smartphone makers to roll out a 5G handset. (Nikkei Montage/source photo by Reuters)

TAIPEI -- In a quest to reclaim its crown as the world's most innovative tech company, Apple is mobilizing suppliers to produce its first ever 5G iPhones next year, with the three flagship models also set to include the most advanced mobile processors available and leading-edge screens, the Nikkei Asian Review has learned.

The upgraded iPhones, which Apple hopes will vault the company over Huawei's current position as the second-biggest smartphone maker, will also likely accelerate global carriers to roll out 5G telecoms infrastructure -- especially outside China, which has already invested heavily in the nascent technology.

Apple has been slow to embrace 5G; its iPhone 11 series this year only features 4G wireless technology. However Apple will push to reclaim its former glory as the maker of the world's "must-have" smartphone with the major product line overhaul in 2020, sources told Nikkei. The iPhone, first launched in 2007, still accounts for around half of company revenues.

Apple plans to ship at least 80 million of the new 5G phones, one of the sources said. Rivals such as Samsung Electronics, the world's largest smartphone supplier, China's Huawei Technologies and second-tier competitors such as Oppo and Xiaomi, have already launched 5G phones.

"It will be the first time Apple introduces 5G iPhones ... There will be three of them and the company has set an aggressive sales target," one of the people familiar with the company's thinking said.

Apple reports fourth quarter earnings after the U.S. stock market closes on Wednesday.

5G is central in the creation an "internet of things" that will make possible remote surgery, driverless cars and other advanced applications of artificial intelligence.

The technology also has geopolitical implications. The rapid rollout of 5G capabilities by Huawei, both at home in China and abroad, has fueled security tensions between Beijing and Washington, which claims that Huawei is engaged in covert surveillance.

China is more advanced than most countries in installing 5G capabilities around the country. By 2025, London-based GSMA estimates that China will have 600 million 5G subscribers, about 40% of the global total, the Financial Times has reported.

However, Apple's embrace of 5G will now likely push global carriers outside of China, such as AT&T and Verizon, to accelerate their investment in the rollout of 5G infrastructure in order to get the environment ready for end-users and so cash-in on high-speed applications, such as advanced gaming.

"The infrastructure is very costly. ... Apple's move to introduce all three 5G iPhones will increase carriers' confidence to invest," Eddie Han, senior industry analyst at Market Intelligence & Consulting Institute, said.

Apple's heft in consumer markets will likely help accelerate 5G use. The company typically ships between 75 and 80 million of its new iPhones each year. A total 260 million new 5G phones will produced worldwide in 2020, MIC estimates, representing around 18% of all new smartphone sales.

"Apple is lagging behind somewhat in introducing 5G products and it definitely wants to catch up," Joey Yen, a tech analyst at market research agency IDC, said. "5G is one of the fanciest marketing buzzwords around ... [especially] in such a mature and competitive market. It is a feature that can grab consumer attention and [allow companies to] claim they are technology leaders."

However, Apple's launch of a premium 5G iPhone lineup could pressure its recent pricing approach to the smartphone market. This has emphasized affordability following a sales slump in 2018 that saw Huawei overtake it as the second-biggest smartphone maker in the world.

As such, Apple also plans to roll out a more cost-effective iPhone SE next spring as part of its strategy to keep targeting budget-sensitive consumers, especially in emerging markets such as China, as Nikkei previously reported.

"Apple is more prepared than previous years to face strong headwinds in China," Louis Liu, research analyst at Shanghai-based Canalys, said. "But it [still] faces a looming challenge, as Chinese vendors and operators are set to drive heavy marketing and promotions around 5G in the next two quarters. This could steal its thunder."

All three of the new iPhones will carry the most advanced 5G modem chip, known as X55 that is designed by U.S. mobile chip developer Qualcomm, four people familiar with the plan told Nikkei. The chip, which enables much faster downloads, faces such an increase in demand that there could be supply constraints, one person added.

The iPhones will also feature Apple's latest-generation processor, known as A14, that will use the world's most advanced 5-nanometer chip technology, as made by Taiwan Semiconductor Manufacturing Co., multiple sources added. Currently, only Apple and Huawei have plans to use this chip production technology next year.

At least two of the three new phones will also have flexible organic light-emitting diode (OLED) displays, currently the world's most cutting-edge display technology, which enables curved screens, better color contrast, and brighter screens. Samsung and Huawei both use OLED screens for their premium handsets.

In addition, Apple is developing a new 3D sensing rear-camera that can sense the environment and detect objects for applications such as augmented reality games, sources said. The iPhone was the first to introduce 3D sensing facial recognition, in its front camera, in 2017.

Apple has had a bumpy ride in its journey to develop 5G iPhones and it was only finally possible after it settled a long legal battle in April with Qualcomm, the world's top mobile chip provider, that allowed Apple to use its 5G modem chip.

Apple had previously looked to Intel to manufacture the chip. But Intel suffered technical issues that jeopardized the timeline for Apple's 5G iPhone launch, thereby prompting the Qualcomm settlement, as Nikkei reported in April.

Apple has since bought Intel's smartphone modem business and it hopes to develop this essential component in-house, a project that may take several years.

Apple declined to comment for the purposes of this article. Qualcomm did not respond to queries.

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