On June 6, China’s Ministry of Industry and Information Technology (MIIT) issued 5G licenses to China Telecom, China Mobile, China Unicom and the National Radio and Television Administration, showing that the 5G era has begun in China. A lot of Western telecommunication and information-technology firms, including Qualcomm, Intel and Ericsson, have said they want to participate in the development of China’s 5G sector, ignoring the trade war launched by the United States against China.
Fifth-generation wireless telecommunications has been one of the hottest topics in the world for the past few years. In April, the US Defense Department’s Defense Innovation Board published a report titled “The 5G Ecosystem: Risks & Opportunities for DoD,” which analyzed the development milestones of 5G technology and the coming challenges for US defense. The US also banned the sales of US products to Huawei Technologies for national-security reasons.
Many countries, including South Korea, Switzerland, the US and the United Kingdom, have sped up their 5G development and launched services, probably trying to fight for a leading status in industry standards. To compete in the markets and fight back against the US in the trade war, China issued its 5G licenses a year earlier than its original schedule.
Too rushed? Maybe a bit. Is China ready? Yes. China’s 5G technology has been leading the world, while its 5G industry chain and telecom network have already been under construction for several years. The commercialization of China’s 5G technology was not built on nothing, but rather on a strong foundation.
Over the past decade, Chinese firms such as Huawei and ZTE have made huge investments in research and development. In 2015, China accounted for 21% of global technology research costs worth US$2 trillion. In 2016, Huawei spent $12 billion on research, Qualcomm spent $5.1 billion, and Nokia $4.9 billion.
Because of Chinese firms’ investments, China has become a heavyweight player in the 5G sector. According to a research report published by IPlytics, Chinese firms had registered 34% of all the standard-essential patents (SEPs) in the world as of April. Huawei owns 15% of these global SEPs.
According to a report published by the Groupe Speciale Mobile Association (GSMA), Huawei and ZTE have a combined 40% market share in Europe. If European telecom operators don’t use Huawei and ZTE systems, they will have to pay an extra cost of $62 billion and face an 18-month lag in technological development.
At the same time, no company wants to miss the huge business opportunities in China. Prior to the trade war, two-thirds of Qualcomm sales came from China, while many key US telecommunication equipment makers also have core businesses in China. According to a report published by the China Academy of Information and Communications Technology, the 5G sector will directly boost the economy by 10.6 trillion yuan ($1.53 trillion), plus a value-added economic benefit of 3.3 trillion yuan, between 2020 ad 2025.
Indirectly, the 5G sector will boost the Chinese economy by 24.8 trillion yuan, plus a value-added economic benefit of 8.4 trillion yuan for the same period. Such a huge market will become a growth engine for the global economy, which has remained weak for a long time.
Also, the efficiency and executive power of China’s telecom operators in implementing infrastructures, networks and services are far better than in other countries. That means the commercialization of 5G technology will be implemented more easily in China than elsewhere. As of now, Chinese firms are important players in terms of building up global 5G standards. China Mobile currently owns 10 formulations of standards, more than any other company.
China’s telecom market will not exclude foreign firms. MIIT has said China will continue to welcome foreign companies to participate in the country’s 5G sector. Any obstacle to foreign firms entering China’s 5G sector will not be erected by China, it said. Failing to enter China’s telecom market will mean a dark future for companies that seek profits.
To a certain extent, the beginning of the 5G era is China’s best response to the US trade war and technology war. From both market and technology perspectives, rejecting China and Chinese firms equals rejecting the future.
China’s 5G sector is a high-speed train. There is not much time left for Western firms to think about whether they want to get on this train or not.
This article was first published on ATimesCN.com and was translated by Jeff Pao.