iPhone 12 5G can download iOS updates over 5G; you might need to manually enable it to work
At the moment, iOS on the iPhone 12 series provides data settings to make it easier for you to set your preferences about network connectivity. First off, you have the option to go all-5G, all-LTE, and to activate the Smart Data mode, which will automatically decide when you need the 5G speeds, and if not, it will drop to LTE in order to save some battery life on the iPhone 12.
Additionally, Apple gives you three data settings for 5G: you can choose to Allow More Data on 5G, or a Standard, or a Low Data mode. If you decide to go for the first option, you will get higher-quality calls on FaceTime, HD video, and audio, and alongside this, your iPhone 12 will be able to download iOS updates over cellular. With this mode, third-party apps can also offer you a better experience, thanks to the faster 5G network speeds.
However, this setting is automatically selected as default only on certain unlimited data plans, and additionally, it depends on your carrier. Apple says that most carriers are choosing the second option, Standard Data mode, as default. It will make FaceTime and video and audio quality to a “standard” level, instead of high quality. The third option, Low Data mode, pauses automatic updates and other background tasks to reduce data usage.
The iPhone 12 series having 5G is definitely one promising aspect of upgrading this year. At the moment, we may consider 5G to be in its infancy, as it is not yet available everywhere and its signal strength is not perfect, but carriers are actively working to make it better and we can reasonably expect improvements to happen over the next months.