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Tap 5G Boom With These ETFs

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5G, the next era of smarter, faster and more efficient wireless technology, is knocking on the door. The initial round of rollouts will likely happen this year and throughout 2020, and carriers are busy building foundations. Since the start of the year, some phone-makers like Samsung and LG have been announcing that they will launch 5G-enabled handsets this year.

Apart from faster usage of mobile networks, 5G is going to strengthen the mechanism of the growing Internet of Things (IoT) so that a human-to-object interaction can be set up smoothly. “From smart care to augmented reality/virtual reality functions, from manufacturing to the automotive industry to medicine and healthcare, the impact of 5G could be felt across many spheres, including Enhanced Mobile Broadband (EMBB), Massive Internet of Things (MIoT) and Mission Critical Services (MCS)”, said Defiance ETFs.

Exponential Growth Projected

Deloitte Global expects about 25 operators to launch 5G service mainly in cities in 2019 with an additional 26 operators to launch in 2020. Also, the market researcher expects to see about 20 handset vendors coming up with 5G-ready handsets in 2019, with the first hitting the shelf in Q2. By the end of 2020, 5G handset sales (15–20 million units) should make up about 1% of total smartphone sales, per Deloitte. Initially, three applications are expected out of 5G rollouts — mobile connectivity, as a modem or hotspot and as a replacement of wired broadband connection.

Per MarketResearch.biz, the global 5G infrastructure market is projected to be valued at nearly $0.8 billion in 2019, marking a CAGR of 48.8%. Last year, IDC estimated that Internet of Things (IoT) spending will witness a CAGR of 13.6% over the 2017-2022 forecast period and reach $1.2 trillion in 2022.

This clarifies the need for efficient execution of 5G in the medium term. Sprint Corporation (S - Free Report) has announced that it will launch commercial 5G services spanning more than 1,000 square miles across nine U.S. cities in May.

United States Cellular Corporation (USM - Free Report) inked a multi-year agreement with Nokia Corporation (NOK - Free Report) to upgrade its 5G network. Nokia also announced that it has inked a deal with Saudi Telecom Company to help the 5G network build-out of the latter in the region.

ETFs in Focus

Defiance Next Gen Connectivity ETF FIVG

The underlying index of the fund – the BlueStar 5G Communications Index – is a rules-based index that tracks the performance of a group of US-listed stocks, of global companies that are involved in the development of, or are otherwise instrumental in the rollout of 5G networks.

Radio access network equipment accounts for about 43.9% of the fund. As far as geographical categorization is concerned, the fund has 78.47% exposure to the United States. Xilinx (5%), Commscope Holding (5%) and Skyworks Solutions (5%) are the top three holdings of the fund. It charges 30 bps in fees (read: Zero Fee ETFs: What You Need to Know). 

Pacer Benchmark Data & Infrastructure Real Estate Sector ETF (SRVR - Free Report)

Before the positioning of 5G, the buildup of its infrastructure is required. Along with some other analysts, we also believe that the efforts could be tapped by investing in SRVR. The underlying Benchmark Data & Infrastructure Real Estate SCTR Index comprises the U.S. listed equity securities of companies that derive at least 85% of their earnings or revenues from real estate operations in the data and infrastructure real estate sectors. Two companies like American Tower Corporation (15.81%) and Crown Castle International Corp (15.54%) hold the top two spots of the fund and belong to industrial REITs. Its third holding Equinix Inc. (15.05%) comes from the area of data center.

ALPS Disruptive Technologies ETF (DTEC - Free Report)

The fund tracks the performance of the Indxx Disruptive Technologies Index. The index identifies companies using disruptive technologies in each of the 10 thematic areas: Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments. No stock accounts for more than 1.39% of the fund. The fund charges 28 bps in fees (read: Defiance Launches Disruptive Tech ETF).

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