As the year 2023 comes to an end, it is time to look at 2024 and foreshadow some of the key developments for enterprise cellular connectivity. The large-scale emergence of 5G Reduced Capability (RedCap) devices is expected to majorly influence the enterprise cellular connectivity market in 2024. This ABI Insight analyzes the opportunity at stake and highlights key recommendations for the telco industry to follow.
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5G RedCap Devices Are Expected to Gain Commercial Traction in 2024
5G RedCap, also called 5G NR-Light, is a significant addition to the 5G family. While the initial 5G release targeted enhanced Mobile Broadband (eMBB), Ultra-Reliable Low Latency Communication (URLLC), and massive Machine Type Communication (mMTC), a need emerged for a solution that could address applications falling between these extremes. To do so, the telco industry—in the form of The 3rd Generation Partnership Project (3GPP)—decided to standardize a new class of devices that falls between these two extremes, called Reduced Capability (RedCap) or NR-Light. 3GPP started standardization work on NR-Light in 2019, which is included in Release 17 (R17).
As the first R17-capable chipsets were announced throughout 2023, ABI Research expects RedCap devices to emerge at scale in 2024. China is expected to lead the market, as different industry voices suggest that the number of RedCap connections will surpass 500 million in 2024—also fueled by different government initiatives.
What Does 5G RedCap Mean for Enterprise Deployments?
At face value, this is a positive development for enterprise cellular, as the emergence of RedCap devices will drive down costs for enterprises. Enterprises’ technology investment decisions are primarily cost-driven, so lower prices will remove the main barrier for enterprises to deploy a private cellular network. This will happen in two ways. First, reducing the capabilities removes a lot of the technological complexity and, therefore, costs to develop chipsets and modules. In the Chinese market, for example, reports suggest that these modules are about 80% cheaper for enterprises than current 5G devices, which focus on eMBB capabilities. Second, the emergence of RedCap devices will also have an overall effect on 5G modules and devices in general, as more devices will increase competition and, therefore, drive down costs of non-RedCap devices as well.
However, the industry needs to be careful and not expect RedCap to magically solve all barriers for enterprises to invest in a cellular network. Most importantly, this refers to the use cases that RedCap devices will be able to address. These devices only use one antenna for signal transmission, so connections can be easily intercepted. Particularly, this is true for industrial enterprises, where the prevalence of a lot of metal creates challenging conditions for wireless communication. Consequently, use cases with a high degree of mobility, such as Automated Guided Vehicles (AGVs) or Autonomous Mobile Robots (AMRs) will be difficult to implement.
Stationary Internet of Things (IoT) use cases such as fixed cameras and sensors for quality control or condition-based monitoring, on the other hand, will be much more suitable for these devices and, therefore, will be an initial target for enterprise 5G deployments.
How Should the Telco Industry Embrace the Emergence of 5G RedCap?
As ABI Research has been saying, the window of opportunity for enterprise cellular and private 5G to gain commercial traction keeps narrowing. The emergence of 5G RedCap (NR-Light) devices can be an important building block that keeps the enterprise opportunity alive—for reasons outlined in the previous section. This, however, requires the entire telco industry to take decisive steps to embrace it.
Chipset manufacturers should react to this and accelerate their RedCap roadmap. At the same, they can also assist in market education and provide a clear set of enterprise use cases that channel partners can realize. This can help enterprises understand the value and benefits of deploying cellular connectivity on their enterprise site. Reference designs and blueprints for enterprise use cases can be an important measure to achieve this.
For infrastructure vendors, this means identifying successful use cases for 5G RedCap and developing a reliable roadmap to include NR-Light into their offering. Crucially, this entails identifying the right semiconductor partner for 5G RedCap. Vendors should look at their existing partnerships and evaluate to what extent these can accelerate semiconductor innovation. In addition, telco infrastructure vendors should focus their messaging around the use cases that enterprises will be able to address and report on key business outcomes that are coming from early deployments.
System integrators should start targeting different use cases for enterprise cellular deployments. As discussed previously, 5G RedCap will be more applicable to well-established IoT use cases (connecting cameras, sensors, etc.). Importantly, system integrators need to remember that enterprise clients come with specific use cases in mind, and it is up to the system integrator/technology provider to determine the most suitable technology to realize these.
At the heart of it, the telco industry needs to bear in mind that any technology (including 5G RedCap) will only be successful if there is sufficient demand for it from the enterprise verticals. It will not magically solve all the hurdles the industry has been facing when trying to advocate for private cellular networks. Neither will it magically bridge the huge disconnect between the legacy telco industry and enterprise verticals. The entire telco ecosystem will need to work together to ensure that this is resolved before pushing enterprises to simply deploy RedCap.