The introduction of 5G Reduced Capability (RedCap) modules marks a critical step in the evolution of Internet of Things (IoT) connectivity. Positioned as a bridge from Long Term Evolution (LTE) to 5G, RedCap promises simplified, cost-efficient solutions for IoT devices across industries. However, ABI Research believes the viability and adoption of 5G RedCap hinges on four key factors:
1.) The expansion of 5G Standalone (SA) networks- 2.) The sunset of 4G LTE
- 3.) Achieving price parity with LTE modules
- 4.) IoT device lifecycle and migration readiness
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1.) Expansion of 5G Standalone Networks
The widespread rollout of 5G Standalone (SA) networks is essential for unlocking RedCap’s full potential. However, SA deployments have fallen well short of what is required. As of early 2024, only 55 5G SA networks were live globally, leaving connectivity gaps in rural and remote areas. This uneven distribution of 5G SA access is a challenge for IoT manufacturers in sectors like Advanced Metering Infrastructure (AMI) and remote monitoring, where devices often operate in less accessible locations.
In markets like the United States and China, 5G SA expansion is moving quickly. This is being driven by robust consumer demand and a strong installed base of LTE Cat-4 devices. Beyond the IoT, operators are rolling out 5G SA to address broader opportunities in Fixed Wireless Access (FWA), automotive markets, and Enhanced Mobile Broadband (eMBB).
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2.) Sunset of 4G LTE
As a transitional technology, RedCap largely depends on the eventual sunsetting of 4G LTE. Network operators are gradually phasing out LTE to pave the way for 5G, but timelines vary significantly by region. Industry experts expect the United States and China to retire 4G first, with the rest of Asia-Pacific and Europe phasing it out later. For example, LTE sunsets are anticipated between 2030 and 2032 in the United States, while Europe may sustain LTE until 2035 or later.
This creates a planning challenge for IoT device manufacturers. Some devices have long lifecycles, spanning 8 to 15 years. These devices require early adoption of RedCap to ensure uninterrupted operation as LTE networks are decommissioned.
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3.) Achieving Price Parity with LTE Modules
Cost remains a key hindrance to RedCap's adoption. Currently, RedCap modules are priced at a premium, costing 3X as much as LTE Cat-4 modules. This pricing gap makes it difficult for many IoT manufacturers to justify migration unless it is essential for future-proofing applications.
In 2026, the introduction of enhanced RedCap (eRedCap) modules is expected to influence the cost dynamics significantly. With prices only about 25% higher than LTE Cat-1 modules, eRedCap presents a more affordable entry point for IoT manufacturers considering RedCap adoption. As second-generation chipsets bring RedCap prices even closer to LTE levels, widespread adoption will become more viable, particularly in cost-sensitive sectors.
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4.) IoT Device Lifecycles and Migration Readiness
IoT device lifecycles play a crucial role in determining the timing and scale of RedCap adoption. Devices in sectors like energy metering or Fixed Wireless Terminals (FWTs), which often operate for over a decade, will likely migrate early to ensure compatibility with future networks. For manufacturers targeting these verticals, the higher initial cost of RedCap is offset by the long-term benefits of future-proofing applications.
Conversely, IoT devices with shorter lifecycles—such as consumer electronics—face less urgency to transition. These segments may delay adoption until closer to LTE sunsets or when RedCap prices become more competitive. By 2028, when LTE sunsets loom larger and RedCap achieves greater affordability, a significant uptick in adoption is expected across both long- and short-lifecycle device categories.
Plan for RedCap Migration Sooner Rather than Later
ABI Research forecasts RedCap revenue to grow modestly to start, with US$92 million expected between 2024 and 2026. However, 2028 will mark an inflection point as Average Selling Prices (ASPs) come down, thanks to eRedCap. These developments will give way to a rapid surge in revenue, reaching US$425 million between 2027 and 2028. In 2029, nearly US$700 million in revenue will be generated—a more than two-fold increase over 2028. Overall, we expect US$1.2 billion in RedCap IoT module sales between 2024 and 2029, with eRedCap making up 62% of total sales.
From an IoT device manufacturer's perspective, the idea of migrating to RedCap may sound risky. After all, 5G SA networks are still nascent, and 4G/LTE is well-established across many industries. However, 5G RedCap should not be viewed as some fledgling technology that only a handful of customers will want. Indeed, RedCap will be a key selling point in future IoT connectivity packages as it provides simplified device architecture and cost savings for devices that do not require robust energy capabilities.
To ensure the seizure of the multi-hundred million dollar opportunity, device Original Equipment Manufacturers (OEMs) must plan their RedCap rollouts today. Even if your customers do not currently consider it a must-have 5G feature, the incoming cost reductions will have them warm up to adoption.
For more on how RedCap can be leveraged in the IoT and what device manufacturers should know before migration, refer to the following resources:
