COVID-19 accelerates 5G competition

By taking shelter and working from home during the COVID-19 lock-in period, consumers have emphasized broadband networks to the limit. On the world stage, the different responses of China and the United States to the needs of remote communications and entertainment mark a new inflection point for global 5G leadership competition. However, the importance of this moment is lost in the daily news about the pandemic. Although the US Congress flirted with the infrastructure bill and passed light-touch 5G framework legislation, China has ordered major economic stimulus in the form of new infrastructure investments (including 5G), totaling up to US$394b. US operators are considering step-by-step measures to speed up network deployment-At the same time, within a week, the protagonists of China’s 5G industry have won new contracts of $5 billion and released strong financial results in the most severe economic adversity .

This is the scorecard of the pandemic era, which compares the United States and China in four main areas of debate: policy, standards, deployment, and international contracts. The audience will observe that the distance between the contestants is increasing.

Policy

China’s national command and control model laid the foundation for the rapid implementation of 5G in the country before the COVID-19 crisis. Authoritative organizations decisively allocated mid-band (or "Goldilocks") spectrum to optimally balance coverage and performance. The state has also provided land grants to operators on preferential terms so that they can quickly deploy the dense small antenna arrays needed for 5G.

At the same time, even if the Trump administration hyped the race, the domestic policy of the United States still had no direction. 5G. The Federal Communications Commission's preference for market-based solutions has left key issues such as network security standards to the industry to resolve. The Federal Communications Commission's (FCC) initiative to reduce red tape initiatives (for example, zoning rights to quickly track antenna placement) has evolved into a lawsuit, but is now in trouble.

A particularly difficult issue is still the allocation of the intermediate frequency Godelock spectrum, which is currently controlled by the government and the government. Private operator. Existing commercial arrangements and possible signal interference will delay the rollout of 5G within this effective spectrum. On the contrary, the United States places high-frequency millimeter wave spectrum at the forefront and center of its 5G strategy. Although millimeter waves provide faster speeds, signals are only effective in the range of hundreds of feet, are easily blocked by physical objects, and require more expensive ground infrastructure.

Standard

If 5G is a competition, then the people who make the road rules have an inner trace. The basic intellectual property rights of the technology define its development framework, create dependence on other developers, and establish a future source of income through the license fees of patent holders. In the development of standards-based IP (so-called "standard essential patents" or "SEP") competitions, China maintains a clear quantitative lead.

As of last year, Chinese companies accounted for 34% of the total number of SEP awards. In contrast, the United States accounts for only 14%, second only to China and South Korea. Huawei alone owns 15% of all standard essential patents and has invested a large amount of state subsidy budget for this strategic R&D work. At many global industry gatherings dedicated to the establishment of 5G standards, Chinese companies have also surpassed their American counterparts.

Domestic deployment

The ultimate test of success is actual domestic deployment, thanks to its $411b national investment. Information on 5G mobile networks-Based on the tens of billions of dollars promised during COVID-19, China is expected to cover the whole country by the end of 2020. The number and density of cellular sites by country/region illustrate this story:

According to ABI Research, by the end of 2020, Chinese operators will have 143 million 5G users, “accounting for 70% of the total number of global connections In contrast, by 2025, the United States will reach 28 million." It is particularly worth mentioning that China Mobile, the world’s largest subscriber operator, has made every effort to deploy 5G, demonstrating advanced technologies such as remote surgery and augmented reality. Effective application. China Mobile signed a new 5G contract worth $5.2b with its suppliers in April, consolidating its undisputed leader status.

Although US operators have formulated a clear 5G strategy, so far, they have largely prevented their launch through misleading consumer marketing activities. Sprint claims that its 5G network covers 11 million people in five cities, but it has not yet reached gigabit speeds. AT&T was caught while deploying the 5G icon to the phone while still running the device on its current 4G network. Among U.S. carriers, Verizon provides the fastest network and the most powerful devices, but coverage is limited to its 5G market.

International contracts

The Trump administration’s public relations activities successfully portrayed Chinese technology companies as high-risk sellers, using real security risks to trigger a trade war. However, Huawei can still claim that two-thirds of all 5G networks outside China use its equipment.

China's export-oriented telecommunications achievements are indisputable. Huawei currently has 800 international projects in operation, while ZTE and China Telecom each have more than 200 (of course, not all 5G-related projects). However, their collective market entry strategy has always been to compete on price, which has led to a greater concentration of customers in developing countries (with financial risks).

The US government ban has actually closed some doors of Huawei and ZTE. Australia, Japan, New Zealand and Taiwan have banned Huawei from their networks. However, there are 54 other countries planning to cooperate with the company, including the US allies Spain and the United Kingdom.

Beyond COVID

The national leadership has surpassed the ability of any company to use only its own equipment to build an end-to-end 5G network, which is unique to Huawei. Internationally, China occupies a dominant position in network hardware sales. However, Crystal Ball Gazelle pointed out that the US industry is positioned to lead the transition from hardware-based to software-defined 5G networks. This may be a change in replacing the dominant position of traditional hardware manufacturers like Huawei. However, without the strong support and inspection of the US federal government, private sector companies lack the funds to seize opportunities during the uncertain period of the COVID economy.

The Sino-US trade war has exposed the close ties between the two countries in the technical field, especially in the 5G supply chain. Of the US companies in Standard & Poor's, 25% or more of the revenue comes from companies in Greater China, except for five, the rest are technology companies. All of these are those in the 5G business. In some technology sectors in China (especially integrated circuits critical to 5G), imports exceed one-fifth of local production. Similarly, more than one-third of Huawei’s core suppliers are American companies. Equipment manufacturers in both countries in turn rely on Ericsson, Nokia, Samsung and other companies as well as a range of accessory sources from other countries. In the 5G ecosystem, competitors have no choice but to cooperate.

However, the COVID-19 crisis has further pulled competitors apart. Among the $5.2b contracts awarded by China Mobile this month, 57% went to Huawei, 29% went to ZTE, 12% went to Ericsson, and the remaining balance went to other Chinese companies. If necessary, it can prove China’s top agenda in China and increase efforts to eliminate foreign suppliers from domestic networks. Another threat to the globalized 5G ecosystem is that as chipmakers withdraw production and idle factories, the pandemic has strained the supply chain of critical network equipment. And, of course, COVID-19 restrictions on public activities limit employees' ability to build network infrastructure.

The Chinese government has taken positive action against the motto "Never waste good crisis". At the same time, the U.S. crisis response measures include redoubled security concerns about Chinese technology suppliers. These concerns are real. However, the public policy of relying on US competitors to compete with Chinese competitors has not grasped the point, that is, to accelerate the popularization of 5G. It can also diverge the next-generation wireless communications market, thereby bringing technical and geopolitical risks. The lack of a unified standard will not guarantee network interoperability and performance. From consumer and business applications to defense partnerships, all of this has an impact: smartphones that cannot communicate across borders; networked industrial equipment paralyzed on incompatible Internet of Things; reconnaissance and surveillance applications cannot efficiently transmit data . This situation undermines the short-term economic recovery and the long-term upside of 5G. If the United States wants to regain its leading position in this competition, it needs to play the role of leader.

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