China pulls ahead of US in 5G race despite trade war, Huawei blacklisting
- Chinese mobile operators are moving ahead on the back of virtually free airwaves and cheap 5G network equipment
- Telecoms gear suppliers Huawei and ZTE have also established a lead in 5G tech patents
In the race for technology supremacy, China is betting it can seize the lead by building the world’s biggest 5G wireless networks.
To get there, the country is banking on the might of the one-party state, making sure its state-run carriers have access to cheap airwaves and fast, inexpensive approvals for putting up the hundreds of thousands of base stations the fastest wireless technology requires.
As top mobile carriers elsewhere flinch at the cost of building 5G wireless networks, China’s operators are barrelling ahead on the government’s mandate, virtually free airwaves and equipment at less than half the price US carriers are paying. Being the first to reach massive scale with next-generation networks could also help the nation in its ambition to dominate fields such as factory automation, robotics and autonomous driving.
“5G is a foundation and catalyst for reinventing industries,” said Paul Lee, UK-based head of research for technology, media and telecommunications at Deloitte Consulting. “The fundamental benefit of being the first mover is that you can build business models on the back of that and export them to other countries.”
South Korea’s wireless carriers were the first to offer commercial 5G services, with SK Telecom launching its network in April and Samsung Electronics already offering a 5G-enabled smartphone. But while US carriers in cities like Minneapolis and Chicago have started providing 5G, it is in sheer scale where China is on course to edge ahead over the next five years.
That size advantage is also reflected in China’s push to invent 5G technology.
The country’s biggest companies have already established a lead in patents related to the fastest network technology. Huawei Technologies, the contentious Chinese firm that is at the heart of current US-China trade tensions, leads the pack as the world’s biggest telecommunications equipment supplier. Meanwhile, ZTE Corp, which has also drawn America’s ire in the past, comes in at No 3, according to Berlin-based patent information platform IPlytics.
But that will not necessarily translate into network domination. China’s three Hong Kong-listed carriers – China Mobile, China Unicom and China Telecom Corp – are all state owned.
Harvard Business School economist Shane Greenstein said having a bigger government role in 5G may not provide an advantage.
“The private firms in China in the digital sector have an admirable record with experimentation,” Greenstein said. “The state-owned enterprises? That is a more open question.”
Where the government is helping is by holding carriers’ costs down.
Beijing is providing the bandwidth for 5G networks almost for almost free, said Edison Lee, head of telecommunications research at Jefferies Hong Kong.
US carriers, by contrast, bid US$2.7 billion at two auctions of 5G airwaves, according to the Federal Communications Commission (FCC). In India, the industry group representing carriers said its members cannot afford spectrum the government expects to auction for about US$84 billion this year.
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China’s operators will also pay less for 5G base stations. These units will probably cost about US$30,000 each in China, less than half the US$65,000 average in other developed-economy markets, Jefferies’ Lee estimated.
Two of China’s carriers have said they will lease the equipment, cutting the upfront cash outlay to roughly US$6,500 each per year, according to Lee.
In the US, where the government is leaving 5G to companies, carriers will also pay at least five times more than Chinese telecoms network operators for civil engineering and permits to build 5G, Deloitte Consulting has estimated.
The world’s most populous country has about 350,000 5G-operable base stations deployed, nearly 10 times as many as in the US, according to a US Department of Defence (DoD) study.
The report said China claiming the position of standard-setter for 5G, with Huawei leading rival telecoms equipment makers, is a risk for the US.
This “will create serious security risks for DoD going forward if the rest of the world accepts Chinese products as the cheaper and superior option for 5G”, according to the report.
The idea of China securing that advantage is also stoking concern among competitors beyond the telecoms equipment and wireless services industries.
China will be “saving hundreds if not thousands of lives much sooner than we will as we fumble to determine which is the standard that is best for the long-term road map in the Western world”, said Qualcomm senior vice-president Patrick Little in an interview.
ZTE is conducting 5G tests on self-driving cars, and has cooperated with Audi’s China unit to develop “internet-of-vehicles” technology. In robotics, ZTE is working with Chinese internet search giant Baidu and Siasun Robot & Automation Co to develop 5G applications.
The benefits of setting 5G standards may also help China outside its borders. President Xi Jinping’s Belt and Road Initiative includes a push for Chinese-built network infrastructure across the length of a route that runs across Eurasia, the Middle East and parts of Africa.
“Developing countries that are more sensitive to cost will find the Chinese 5G price point difficult to turn down, especially when the offer is sweetened with infrastructure and project-financing incentives like the Belt and Road Initiative,” the US Department of Defence report said.
For its part, the US is letting the private sector guide 5G development, FCC chairman Ajit Pai said in a June speech to wireless executives in New York.
“For all this talk about our government’s focus on 5G, make no mistake that we are pursuing a market-based strategy to promote 5G development and deployment,” Pai said.
The US government’s crackdown on Huawei, cutting it off from components made by American hi-tech companies, will be a big test of China’s 5G lead, said Anthea Lai, Asia-Pacific media, technology and telecoms analyst for Bloomberg Intelligence.
“Before Huawei’s ban, China had strong potential to lead in stand-alone 5G,” Lai said. “But now we have to see how much Huawei can keep its carrier business intact. Huawei could slow China down.”
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