5G RedCap in Southeast Asia: The Next Big Opportunity for the Region?

In September 2023, Malaysia’s 5G network wholesale operator, Digital Nasional Berhad (DNB), announced a successful trial of Ericsson’s pre-commercial 5G Reduced Capability (RedCap) software on its network. The tests were conducted on the 700 Megahertz (MHz) and 3.5 Gigahertz (GHz) frequency bands for both data calls and Voice over New Radio (VoNR), and demonstrated support for a wide range of Internet of Things (IoT) devices, ranging from consumer wearables to industrial sensors. Ericsson’s RedCap is offered as a software that can be added to existing hardware equipment and is set for commercial release in November 2023.

In the same month, Thailand Communications Service Provider (CSP) Advanced Info Service (AIS) also announced a successful validation of 5G RedCap technology on the 2.6 GHz spectrum band. The trial, conducted in collaboration with ZTE Corporation and MediaTek, was conducted at the AZ Innovation Center in Bangkok and demonstrated strong results across test cases such as network access, mobility, and voice services. Separately, AIS had also partnered with Huawei to test and verify 5G RedCap capabilities using commercial RedCap devices such as Data Transfer Units (DTUs) and Closed-Circuit Television (CCTV) cameras.

5G RedCap was a concept introduced in The 3rd Generation Partnership Project (3GPP) Release 17 that aims to address mid-tier IoT use cases, supporting higher bandwidths (~85 Megabits per Second (Mbps)) and lower latencies, compared to existing Low-Power Wide Area (LPWA) network technologies (e.g., Narrowband IoT (NB-IoT) and LTE-M). RedCap introduces a balanced combination of capabilities in terms of higher data throughput, longer battery lives, and lower device complexity, and is expected to support new IoT use cases where the high performance of 5G is not required. Such use cases include consumer wearables (i.e., smartwatches), Industrial IoT (IIoT) sensors, video surveillance, Artificial Reality (AR)/Virtual Reality (VR) applications, etc. Perhaps most importantly, RedCap devices are expected to cost 60% to 70% less than conventional 5G user equipment, thus facilitating adoption of the technology with lower upfront Capital Expenditure (CAPEX) costs.

ABI Research estimates that IoT connection revenue in the region will grow from US$5.7 billion in 2022 to over US$20 billion in 2030 (at a Compound Annual Growth Rate (CAGR) of 17.5%), making the Asia-Pacific region a lucrative market for IoT players. Given the ability of RedCap to support even more use cases than before, it presents CSPs with an even stronger opportunity to capitalize on the IoT growth momentum in the Asia-Pacific region and capture market share.

Despite the various capabilities that RedCap can reportedly bring to the market, the technology can only be successful if there is sufficient demand for it in the vertical markets. This was one of the main roadblocks faced by initial 5G rollouts, where many CSPs and enterprises struggled to find and develop key use cases for 5G. To avoid facing the same issues, ABI Research recommends that CSPs consider the following actions to better prepare organizations for the adoption of 5G RedCap:

• Build Strong Use Cases and Demonstrate Value Early: Despite the purported benefits of 5G RedCap, it should be noted that the technology is still in its nascent stages and the current lack of diverse real-world applications (beyond trials and Proofs of Concept (POCs)) could hinder widespread adoption of the technology. As per the initial launch of any new technology, end users tend to be skeptical about adopting these new technologies unless a key value proposition can be clearly demonstrated. It is crucial for CSPs to work closely with their end customers, Network Equipment Vendors (NEVs), and System Integrators (SIs) early in the process to identify key business problems and demonstrate how 5G RedCap can deliver greater value (e.g., higher performance, lower Total Cost of Ownership (TCO), improved Returns on Investment (ROIs), etc.) to organizations.
• Build Strong Vertical Partnerships and Collaborations: CSPs should continue to focus on building a strong local ecosystem by forming strategic partnerships with leading players across verticals. As covered in an earlier ABI Insight (“The End of the 5G Deployment Row? Malaysia Decides to Adopt a Dual Network Model for 5G Rollout in the Country”), some positive developments observed in Malaysia include the Maxis 5G Alliance (M5GA), which aims to showcase 5G solutions and promote 5G adoption across industries, as well as the launch of the Malaysian Research Accelerator for Technology and Innovation (MRANTI) 5G Experience Center, which provides visitors with an immersive experience with regard to 5G use cases. In Thailand, AIS has also partnered with telco equipment maker ZTE to launch a 5G center for innovation and solutions, creating opportunities for AIS to prevail in targeted 5G vertical solutions, such as smart transportation and smart cities. Such collaborative efforts and 5G RedCap promotion activities will be crucial to help boost RedCap adoption in the country.

While 5G RedCap brings along with it a host of strong capabilities, ensuring widespread adoption of the technology will be a major hurdle for CSPs. In order for CSPs to capitalize on the growing IoT market in the Asia-Pacific region, ABI Research recommends that CSPs act now to develop compelling use cases and build a strong ecosystem for the future RedCap market.