Susquehanna: Apple's (AAPL) Best 5G Phones Could Still Be a Year Away

Apple (NASDAQ: AAPL) had a great year in 2019, that much is clear; it not only saw an 89% annual gain for its own operations, but it also beat the S&P 500's own 29% rise handily. Yet the question of how sustainable Apple's amazing 2019 actually is going into 2020 is a bit doubtful. In fact, one new report from Susquehanna suggests that Apple may end up hamstrung in 2020 thanks to an appreciable delay on its best 5G iPhones, which may not arrive until early 2021.

What's the Holdup, Apple?

The Susquehanna report notes that the first 5G iPhones will likely be arriving at the normal time for new Apple products: around September. Par for the course, but that's not where the problem kicks in. The problem is that those new 5G iPhones won't be using the fullest version of 5G, and the better models won't go live until at least December 2020, potentially even stretching into January 2021.

The reason for this release lag stems from Apple working to build some of its own components in-house, particularly the Antenna-in-Package systems that help drive the more powerful versions of 5G  access. By not sourcing its components from a third party supplier, as Apple has so often in the past, it's taken on more control of the supply line, a move that comes with tradeoffs. It has to create all its own parts from scratch under such a move, but is no longer subject to unexpected shortages from suppliers, as all of Apple's production can go to Apple orders.

What's the Holdup, Everybody Else?

Moreover, Apple isn't the only laggard in the field. The 5G rollout has been sporadic at best and sparse at worst. It doesn't help matters that there are actually several sub-breeds of 5G access, and some of these aren't all that great to begin with.

For instance, T-Mobile (NASDAQ: TMUS) recently brought out its 5G network with nationwide access, but this 600MHz network represents only a slight improvement over 4G LTE access. There's a different kind of 5G access known as mmWave, and that's the one that sounds closest to the hype we've all likely heard at some point around 5G.

The mmWave network is about 10 times more powerful, and therefore faster than 4G LTE, but access to the mmWave network is limited to a handful of locations. The mmWave network also has significant shortcomings, especially in its signal quality. It doesn't have a very good range from a tower, and it's stymied by building walls, which means anyone who wants to use mmWave connectivity needs to be not only in an area with a tower, but also had better be standing pretty close to that tower, and in line of sight, too.

A Perfect Storm of Bad News

Thus, Apple is left with a bit of a Hobson's choice: either it eschews its traditional September product launch, which has been a thing for years now, to wait for the network to get up to snuff, or it releases an abbreviated line for an abbreviated network, and rolls out the big guns when there is actually a network for them to run on. There will also be some key differences in the lower-end-capable and the higher-end-capable iPhones, including display variants; the mmWave-capable iPhones are said to boast optical LED (OLED) screens, while non-mmWave-capable devices will stick to the more standard LCD.

Neither choice comes without its drawbacks, and neither choice makes Apple look especially good. Apple's basically left to choose between violating a traditional event because it doesn't have much to show, or losing nearly three months of sales impact while it holds out for a full release.

Given that Piper Jaffray recently bumped up its price target on Apple stock on the strength of 5G releases, if those don't actually come out this year, the impact may be diminished or not hit at all. It's also the kind of news that lends new credence to Paul Meeks' projections of an Apple in decline, as the phones everyone's waiting for may not even show up this year.

Apple had a phenomenal 2019. Of this, there can be no doubt. Yet the growth that drove Apple's 2019 may not be as sustainable as hoped. A hamstrung fourth quarter certainly wouldn't help matters much, but does Apple have much choice? Can it release phones knowing that the networks to run them are still in their early stages?

The upshot here is that the year itself is still best to describe as in its “early stages,” so the whole point may prove moot by September anyway. If the mmWave-capable 5G networks can roll out just a hair faster, Apple can still launch its biggest guns and take advantage of the sales rush. After all, there will likely be plenty of people willing to buy a new iPhone with the caveat that its fullest range of features may still be a couple of months out from the purchase date. It's still the new iPhone, after all.