Dr. Ling Zhipei started operating on the patient’s brain at 9 a.m.

He precisely implanted an electrode stimulator on one part of the brain. The stimulator would help regulate the patient’s Parkinson’s disease. Three hours later, the procedure was a success.

What made this brain surgery unusual was Dr. Ling performed it from an office 1,864 miles away.

While the patient was at a hospital in Beijing, the doctor was at his other office in a coastal city in the southern province of Hainan in China.

As the crow flies, Beijing and this city are about as far apart as Las Vegas and Charlotte.

Brain surgery is serious even under the best circumstances. Going under the knife when your surgeon is nearly 2,000 miles away is almost unthinkable.

But 5G technology made it possible.

Let me explain…

Fifth-generation, or 5G, is the next level of cellular network technology. Most people assume it will just make scrolling through your Facebook feed faster.

But the revolutionary part of 5G is not improving your social media experience. It’s connecting devices that will change your life: automated cars, health-monitoring devices, safety equipment.

As it infiltrates cities, it will even connect devices as small as the surgical tools that Dr. Ling used to work on his patient’s brain.

The economic benefits of real-time connected devices are tremendous. Research firm IHS Markit estimates there will be $12.3 trillion worth of increased global output on the back of 5G by 2035.

But here’s the thing: The service barely works right now. And that spells opportunity for savvy investors who know what it’s going to take to make 5G function. That’s why today, I’ll lay out what’s holding back 5G… and the solution that you should bet on if you want to reap gains from this trend.

First, let’s back up and take a close look at the current 5G landscape…

The 5G Miracle

Right now, most consumers are still using the 4G network.

Until recently, 4G was a freeway compared to the three generations that preceded it. 5G will leave it in the dust.

The next generation of service will increase download speeds 10 to 100 times what 4G offers today. Your 4G phone may display a spinning icon while you wait for YouTube to show you a video. Your 5G phone could download a full-length, high-definition version of the movie Titanic in seconds.

That’s tied to the concept of “latency.” It’s a technological term for the delay in a signal reaching its destination.

Think of this like the delay on a long-distance phone call years ago. Or like in the early days of news channels using satellites to stream field reports. If you weren’t careful in either case, you’d talk over the person on the other end of the line.

While latency is annoying in a phone conversation or TV interview, it can be deadly in something as precise as the brain surgery operation in China we mentioned above. With 5G connectivity, latency is so low that the doctor was able to direct surgical tools over 1,800 miles away.

Analog devices used in everything from health monitoring to forestry work will connect on a 5G network. This enables real-time monitoring and instruction from a central facility. The stuff of science fiction is about to be reality.

As we mentioned above, this will be a boon for the economy. While connected machines will replace some workers, IHS Markit sees 5G creating an additional 22 million jobs in the next 15 years. A 5G network could even deliver 15% growth in GDP as it connects the world.

However, there’s one big obstacle standing in the way of 5G’s benefits…

The Next Phase

Today, you can walk into a Verizon store, buy a 5G-enabled phone, and get access to nearly instant download speeds and miniscule latency.

The problem is, you’ll drive across town and realize the service doesn’t work. You’ll be back on 4G, wondering why you spent $1,300 on a 5G-enabled phone.

So while 5G is already available in several big cities—like Atlanta, Chicago, and Denver—it’s limited.

Take Chicago, for example. If you’re standing next to the famous Bean in Millennium Park, you’re connected to 5G. But walk a few blocks west, and you’re back on 4G… the same service you currently have.

And 5G connectivity is not possible on the existing 4G cellular network.

The 5G signal operates on a higher spectrum than its predecessor. All this means is that the 5G signal uses shorter waves to transfer data than the current 4G network uses. That’s what gives 5G its speed and its ability to transfer more data.

However, today, it’s almost impossible for a device to maintain its connection to a 5G signal. That’s because 5G’s shorter wavelength means its signal doesn’t travel as far.

That’s why companies like Verizon and AT&T are committing billions of dollars to build out tens of thousands of new cell towers for the 5G network.

Take it from Rudy Reyes, the west region vice president and associate general counsel for Verizon:

We are going to need about five to 10 times the number of 5G nodes, as we will 4G LTE nodes. Just for downtown LA, Verizon alone is going to need around 200 to 300 small cells just to densify for 4G LTE. Then you have to multiply that by five to 10 times for when we get to 5G.

There’s a lot at stake with the 5G network. It’s a reason why President Trump said, “It’s a race America must win.” It’s also why investors are buying up shares of companies related to 5G.

But not every company in the space is worth investing in. The fact is, the trade war with China is showing us which companies will come out on top. If you’re going to invest in 5G today, it’s best to avoid companies that do a lot of business with China. If the trade war drags on, shares of those companies, like Qualcomm (QCOM), will suffer.

Instead, focus on the picks-and-shovels of the 5G revolution. That means companies that build the parts that make the 5G network functional. Big telecommunication companies like Verizon may get all the headlines in the press, but it’s the device makers that will make things like remote brain surgery possible in a 5G world.


E.B. Tucker
Editor, Strategic Investor

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