The 5G RedCap State of Play: An Update on the IoT Opportunity

5G Reduced Capability (RedCap) was finalized in The 3rd Generation Partnership Project’s (3GPP) Release 17 (R17) to provide a simplified and affordable alternative to the full spectrum of 5G capabilities. With equivalent data rates to Long Term Evolution (LTE) Category 4 (Cat-4), 5G RedCap offers a natural migration pathway for 4G LTE devices with intermediate throughput requirements.

In 2024, a handful of RedCap Internet of Things (IoT) devices were launched, including video surveillance Internet Protocol (IP) cameras, and Fixed Wireless Terminals (FWTs) and routers, as found in ABI Research’s 5G RedCap for IoT report (AN-6235). However, at CES 2025, no new RedCap IoT devices were launched, with coverage limited to the promotion of the first generation of RedCap IoT modules, including SIMCom’s SIM8230.

As for other RedCap devices, the focus was on Mobile Broadband (MBB) and Fixed Wireless Access (FWA) applications, with devices that had already launched in 2024. TCL showcased the LINKKEY IK511 Universal Serial Bus (USB) dongle, which integrates Qualcomm’s X35 chip. Meanwhile, MeiG Smart presented its SRT875R MiFi and SRT835 Customer Premises Equipment (CPE) devices, which are both run on MeiG’s own SRM813Q module, which integrates Qualcomm’s X35 chipset.

Shortly after CES, Sequans announced the acquisition of Advanced Circuit Pursuit (ACP), a Swiss-based manufacturer of 5G RedCap circuits and transceivers. Having sold its 4G LTE business unit to Qualcomm in 2024, the new deal will aid Sequans’ efforts to quickly capture market share with its 5G RedCap Taurus LT and Enhanced RedCap (eRedCap) chips, which are currently in development.

The news that 5G RedCap may be gaining more early traction in MBB verticals seems counterintuitive, as RedCap was originally seen as a pathway to 5G for so-called “mid-range” IoT devices that do not require or cannot afford full 5G connectivity. The limited showing of RedCap IoT devices at CES implies three key insights:

1. A Lack of Market Readiness: Original Equipment Manufacturers (OEMs) are aware of 5G RedCap, but for most, it is not top of mind, because they believe it does not offer anything groundbreaking that LTE could not do before. Manufacturers will not pay extra to migrate to a technology that they do yet need, and it is likely that two other factors will drive migration to 5G RedCap: LTE network longevity and module pricing. Without any revolutionary optimizations or upgrades, the value of 5G RedCap is limited to the future-proofing of device operation into the 5G era. With no immediate threat of LTE network shutdowns, there is little incentive for OEMs to migrate until the latest possible opportunity. However, if 5G RedCap module prices were to fall to parity with LTE Cat-4, manufacturers would then likely switch out to dual-mode RedCap modules, and run their devices on LTE until there is 5G Standalone (SA) availability. As of 4Q 2024, 5G RedCap modules were expected to be priced at between US$35 and US$50, over a 2X premium on LTE Cat-4 equivalents.
2. Limited Addressable Market Opportunity Compared to eRedCap: The early rollout of RedCap MBB devices highlights that 5G RedCap (R17) is too powerful for most IoT applications. 5G RedCap will be suitable for devices that currently use Cat-4 (and potentially Cat-6), which are common in IoT verticals, including remote monitoring, security, and Advanced Metering Infrastructure (AMI). However, the Total Addressable Market (TAM) for 5G RedCap is considerably smaller than the market opportunity for the second iteration of the RedCap standard—eRedCap. Finalized in Release 18 (R18), eRedCap provides equivalent data rates to LTE Cat-1 and Cat-1bis, which are widely used across today’s IoT applications, including wearables, telehealth, and asset tracking. According to ABI Research’s 5G RedCap for IoT report (AN-6235), 56 million, or 71% of all RedCap shipments are due to be eRedCap in 2029, with 23 million 5G RedCap (R17) modules making up the remaining 29% of shipments.
3. Launch of New Modules and Investment in Chipset Development Reflects Component Manufacturers’ Expectations of Future Monetization Opportunities from 5G RedCap and eRedCap: For example, SIMCom’s new SIM8230 5G RedCap module targets wearables and health tracking, with SIMCom claiming that it enhances the monitoring of physiological data in real time for wearable exoskeleton devices. In the market for RedCap chipsets, Sequans’ acquisition of ACP to enhance its 5G RedCap and eRedCap chip development demonstrates its desire to accelerate time to market, having sold off its 4G intellectual property to Qualcomm. ABI Research forecasts that annual RedCap IoT module revenue will reach US$690 million in 2029, and Qualcomm, MediaTek, ASR Microelectronics, UNISOC, and HiSilicon all want a slice of the pie. While eRedCap module shipments are expected to dominate, 5G RedCap modules will sell at higher prices, with expected revenue of US$260 million in 2029. Module vendors Quectel, Fibocom, MeiG, Cavli Wireless, Telit, Neoway, and Sierra Wireless have all released 5G RedCap modules in anticipation.

Having considered the market bottlenecks, we can see that RedCap migration roadmaps are significantly dependent on network operators’ timelines for LTE network shutdowns and the rollout of 5G SA. A series of factors should drive 5G RedCap and eRedCap adoption.

IoT OEMs with longer device life spans that currently use Cat-4, including in video surveillance and FWT applications, should consider fast-tracking their migration to 5G RedCap. Devices with a life span in excess of 8 years may overlap with the winding down of LTE networks, meaning these devices are likely to need future-proofing in the near term. All RedCap chipsets are known to have dual-mode support for 5G RedCap and Cat-4, meaning these will run on LTE networks for now, and can be readily upgradable to 5G RedCap when there is 5G SA availability.

IoT OEMs with shorter device life spans will not pay a premium for a technology that they do not yet need, and it is likely that we will need to see a significant cut in 5G RedCap module prices to attract IoT device manufacturers. The launch of optimized second-generation chipsets by 2026 should help push 5G RedCap module prices further toward the parity mark with Cat-4. In the longer term, the looming threat of LTE network shutdowns should accelerate the proliferation of RedCap devices, as OEMs seek to secure their devices’ operation into the 5G era.

In consumer IoT, there are rumors that 5G RedCap could provide the connectivity for the Apple Watch Ultra 3 as a cheaper and less power-hungry alternative to full 5G. The device is expected to launch later in 2025 and may act as a bellwether as we look toward the first wave of 5G-capable wearables devices. While early device 5G RedCap launches have largely focused on MBB, FWA, and consumer applications, growth in these markets will likely benefit the IoT indirectly. The availability of optimized components, and greater economies of scale for module and chipset vendors should equate to cheaper components and reduced Bill of Materials (BoM) costs for IoT system designers.