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5G Data Economy Weekly Newsletter No. 47

Dear friends,

This is a weekly newsletter of what we've seen in 5G and 5G-enabled data economy, ranging from technology to policy and business application. It's designed to keep you engaged and we also try to make it interesting. Enjoy reading! Not a subscriber yet? Sign up here
5G Baseband Providers Getting Ready to Push 5G Devices Into Mass Market

By the end of February 2020, almost all major Android smartphone providers have launched their 5G devices. However, most of the devices announced so far are still solidly in the 3000+ RMB (400+ USD) range, with Redmi K30 from Xiaomi the only exception.

The biggest obstacle for a lower-priced 5G phone is, of course, the extra cost from 5G baseband and RF system. Only a handful of companies in the world can design a working 5G baseband processor, and not surprisingly they all chose to start with the highest-end flagship solutions which carry a price tag as high as $100+.

For the 5G phones to enter the mainstream, the prices for the 5G baseband and the phone itself have to come down. Luckily we are seeing more mid-range baseband solutions in the pipeline for later this year from both Qualcomm and MediaTek; Huawei is expected to launch their own design of mid-range Kirin 820 soon; and UniSoC has just announced their first 5G SoC T7520, although we don’t know the detail of this product, we highly suspect it's a low to mid-end solution given UniSoC's position in the market. 

With the introduction of these more cost-effective solutions, we expect 5G smartphone price to quickly drop to 2000 RMB (less than 300 USD) range in the next 3-6 months, and likely down to 1500 RMB (200+ USD) range by the end of the year in China.
Qualcomm Flexed Their Muscle Again With the Introduction of X60 Baseband, New mmWave Antenna Module, and Ultrasaw Filter

Qualcomm recently introduced a series of new products including the third generation 5G modem X60, the 2nd generation mmWave antenna module QTM535, the new UltraSaw filter technology, and AR/VR handset reference design based on its new Snapdragon XR2 5G platform.

We won't go deep into the technical details of these new products, but we are impressed, to say the least. For example, the new X60 baseband supports carrier aggregation between Sub-6 and mmWave spectrum, a feature many in the industry thought was impossible.

We liked Qualcomm for 3 reasons:
  • Continued strong leadership in the core baseband market
  • mmWave adoption and RF progress make an additional contribution to content growth per smartphone
  • Adoption of Snapdragon platform in adjacent markets including PC, Automotive, Server and AR/VR
The latest announcement demonstrated the progress Qualcomm is making in each and every one of the above.
Salesforce: Strong Revenue Growth, Tableau Performing Better Than Expected. Keith Stepping Down Triggers Concerns Over Long-Term Operating Margin Expansion

On Feb 25th, Salesforce reported strong earnings that beat analyst estimates on most metrics (Revenue, OCF, EPS, cRPO). There are a lot of moving parts in the earnings report. On the positive side, the company raised its FY21 full-year guidance by 200 million to 21.0 to 21.1 billion, a 23% YoY growth. It also reiterated its $34-35 billion revenue target for FY24, implying a 20% four-year CAGR. Salesforce announced it is acquiring Velocity, an industry-specific cloud software company for $1.33 billion. The management also commented that Tableau has been performing better than expected.

On the negative side, Keith Block stepping down from Co-Chief only after 18 months was totally unexpected for investors. Salesforce's recent management shuffle can be found here. Wall Street analysts have praised not only Keith’s success on vertical market solutions but also his ability to drive margins. With Benioff at the helm focusing mostly on M&As, there will be again a wave of skepticism over Salesforce's ability to drive operating margin expansion. Number crunching on Salesforce's “organic revenue growth” has long been a headache for Salesforce investors. To make things even more complicated, a large part of MuleSoft and Tableau revenue are recognized as licensing revenue. Licensing is more volatile than cloud subscription revenue and Salesforce, so far, has not broken out license revenue from subscription revenue.
 
With respect to coronavirus, similar to most SaaS companies, the management believes Salesforce will continue to see sustainable growth: “I think that when we've looked at architecting Salesforce over the last 21 years and as we've looked at navigating the economic crisis that we've been through before. We've been through two serious recessions. Now as we look at navigating a biological crisis. When we started Salesforce, Parker and I really built a business model that was designed to transcend these situations so that we would have durable growth over time regardless of the crises.
New Software Stack Update: Elastic, Strong Quarter, New Leadership, and Well Received New Elastic Stack Release

On Feb 26th, Elastic reported strong FQ3'20 earnings, with total revenue growing 61% YoY, SaaS revenue 118% YoY, and calculated billing 54% YoY. The company finally closed a portion of the federal deals that slipped last quarter. The strong headline numbers helped the Elastics end the week up 1.5%, compared with a brutal 10.5% decline of Nasdaq. 
 
However, despite the strong results, investors seem still concerned about the rapid slowdown of “organic RPO-based booking growth” (around 22% YoY). The management explained that the slowdown was mostly due to shorter contract duration and that monthly SaaS has no remaining performance obligation (RPO).
 
Elastic also announced the departure of CRO Aaron Katz. Justin Hoffman, a 7-year veteran at Elastic search, will lead the global sales for now. In addition to the CRO transition, Elastic brought in Sally Jenkins (previously marketing leader in VMware and Symantec) as CMO. We view the development as positive news since Elastic needs to scale its business beyond $1 billion in revenue. 
 
In terms of product offerings, the company continues to innovate at a fast pace. It released version 7.6 for Elastic Stack on Feb 11th, which enables faster search queries. The latest version is well received among developers according to our channel checks. The company also released several proprietary features to Elastic Cloud, such as App search and Elastic Cloud on Kubernetes. The management continues to downplay the AWS’s Open Distro’s threat to Elastic Saas business, “when it comes to Open Distro. We see very little adoption of it. When it comes to SaaS, the answer is the same. We're driving for product differentiation.

Elasticsearch is widely popular among Chinese developers. For our readers who can read mandarin, we collect some links to Elasticsearch’s product roll-outs and coming online conferences in China below:
  • Elastic 7.6 roll-outs in China. Link
  • Elastic Endpoint online conference. Link
  • Alicloud contribution to Elastic search. Link
Interesting Reading

1. How AT&T is transforming itself for a future of 5G and streaming. Link
2. Google plots course to overtake cloud rivals. Link
3. Meet Bytedance's biggest homegrown rival: kuaishou (fast hand). Link
4. ENCQOR 5G reaches a new milestone in signing memorandums of understanding with 6 telecom service provider. Link
5. We introduced the world to 5G, now it's going mainstream. Link 
6. We ran into Danny Data's YouTube videos that analyze Meituan Dianpin and many other Chinese TMT companies. Highly recommended.
Meituan Dianpin Deep Dive by Danny Data (English Caption) 
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