Sami Badri, Credit Suisse Explains Direct and Indirect Beneficiaries of 5G
by Josh Anderson
SEATTLE, WA – CapRE has often welcomed Sami Badri, Senior Analyst at Credit Suisse to speak at our Data Center Summits, in which he has recently focused on outlining a handful of forces that will accelerate cloud demand in the future. Fortunately for us, Badri was willing to serve as Keynote Speaker at CapRE’s Fourth Annual Greater Seattle & Pacific Northwest Data Center Summit, where he dove deep into a new area of research for him – 5G. Below, we highlight a riveting portion of his address, which outlines what to expect in the coming quarters with the advent of 5G, and who will benefit from it.
“The way that I like to do my research is to first tell you some points, but I like to attach specific takeaways to it,” began Badri. “So in this slide I’m going to talk about which companies are directly, positively impacted by the 5G adoption rate. Specifically, that densification. And then, specifically, which companies are indirectly related. When you think about directly impacted companies, you think about AT&T and Verizon. Your big flagship names. But then there are also tower operators. Your fiber operators. Your network equipment vendors that are in charge of manufacturing and providing the boxes, specifically to densify the networks.”
“Then there is another component of 5G that I think a lot of people overlook, which is the software virtualization dynamic,” Badri continued. “Because if you actually think about what 5G really is, the only way to achieve this type of density is to do what Cloud computing has done. So for example, if I talk about Amazon and Google and Facebook as well, the way they have achieved their economies of scale has a lot to do with their software usage – the way that they have programmed their infrastructure. Telecommunications and telecom computing essentially have to take the same path and that’s why software virtualization is going to be a big component of 5G.”
According to Badri, there are going to be indirect beneficiaries of this trend as well — and that includes multi-tenant data centers, cloud providers, and Edge data center providers, which are still in their infancy. “So now I’m going to give you guys some timelines in terms of how all of this is going to play out – at least from where I sit,” he shared. “From a financial modeling, time and company guidance perspective, in Q3 2018, going all the way to 2020, you should continue to see small cells, macro cell towers and data center construction continue. We’re not even done with the densification from an infrastructure perspective. And in this realm you can think about your key names – Equinix, Digital Realty, etc. Those will be your big beneficiaries in the data center side. Also, on the tower side, you can think about American Tower, SBA and Crown Castle.”
“Now, shifting into Q1 2019 to Q4 2020, that’s when 400-gig data center switches are going to start shipping,” Badri predicted. “That means immense amount of density, or about 4x the next fastest speed, will start hitting data center infrastructure. The reason why that’s so important is that you don’t actually know what the network topology is going to look like, once all of that capacity starts hitting. So there are going to be a lot of moving pieces probably in the next two to three quarters when these switches finally start hitting data centers.”
And then another piece to consider, Badri intimated, is that a lot of routing technologies will also be refreshed at macro cell sites. “Actually those are the pieces of equipment that aggregate and then report back to major core data centers,” he explained. “So if you think about it, you actually have a massive supply chain that is about to be completely overhauled right now, densified, and built out, all the way through 2020. Right before consumer mobile devices are available for your purchase, from Apple, Samsung and your wireless providers”.
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