to Asia Times for
$100 per year or $10 per month.
Special discount rates apply for students and academics.
Thanks for supporting quality journalism!
Your story will be shown in a few seconds.
(if it doesn't, click here.)
Enjoy the read.
Australia is shocked – shocked – to discover that its main supplier of telecom equipment, Ericsson, depends on Chinese equipment from Panda Electronics, a Nanjing-based manufacturer that appears on the Pentagon’s latest list of Chinese companies linked to the People’s Liberation Army (PLA).
The supposedly incendiary revelation, by now widely reported in the Australian press, came as the US Defense Department named Panda as being “owned by, controlled by or affiliated with China’s government, military or defense industries.”
Panda Electronics, it turns, has a joint venture in China with Swedish giant Ericsson, a major supplier of equipment used by Australian telecom network providers Telstra and Optus. Those tie-ups means Panda, by at least one degree of separation, is and will be involved with Australia’s pending 5G rollout.
China doesn’t want to put Ericsson out of business; it wants to assimilate Ericsson, I reported in Asia Times on June 29 (“US potshots at Huawei miss China’s grand design”). Huawei’s two main competitors, Ericsson and Nokia, are just as vulnerable to Chinese spying as Huawei, because they depend on the same Chinese components.
As I report in my new book You Will Be Assimilated: China’s Plan to Sino-Form the World, dependence on Chinese components makes Ericsson and Nokia just as insecure as Huawei. All three firms use the same manufacturing firms in China, according to industry sources.
Whether a 5G base station carries a Huawei or Ericsson label doesn’t matter. In 2019, the US government asked Ericsson if it could shift production to the US, and the Swedish company dutifully opened a small plant in Texas with a total of 100 employees.
America still has no plans to build hardware to compete with Chinese components. A coalition of US software companies, which Nokia has joined, is talking about a software-based solution using generic computer components to run 5G networks, but practical application is years away—if it works at all.
China’s spending on 5G mobile broadband has been running at five to ten times America’s rate. “US tower companies and carriers added fewer [5G broadband] sites in the last three years than China Tower added in three months,” Deloitte reported in late 2019.
It added: “Since 2015, China outspent the United States by approximately $24 billion in wireless communications infrastructure and built 350,000 new sites, while the United States built fewer than 30,000. Looking forward, China’s five-year economic plan specifies $400 billion in 5G-related investment. Consequently, China and other countries may be creating a 5G tsunami, making it near impossible to catch up.”
Ericsson appears to have a 10% share in China’s 5G buildout, the proportion of 5G base station contracts it won from China Telecom and China Unicom, the country’s dominant mobile providers.
In terms of sales, that’s roughly equal to 100% of the US 5G equipment market. With its largest manufacturing facilities and its largest prospective market in China, Ericsson – the world’s second-largest telecommunications equipment manufacturer – is gradually becoming a Chinese company.
Nokia’s research and development (R&D) is also focused on China, where it formed a joint venture with China Huawin Post & Telecommunication in 2017.
According to Nokia, “The joint venture will carry on the major part of Nokia’s activities in China. It will continue to develop new technologies in areas like IP routing, optical, fixed and next-generation 5G. NSB’s research and development activities will total around 16,000 personnel, including 10,000 researchers, working across six R&D sites in China.”
Nokia’s R&D division employs 17,000 people, so its 10,000 Chinese researchers comprise the majority of its global effort. Despite its commitment to China, though, Nokia failed to win contracts to build 5G infrastructure for China’s mobile carriers in bids awarded last March.
China dominates global capital investment in mobile broadband. Big growth in capex is expected in China. On the other hand, US carriers had scaled back their capex plans for 2020 even before the Covid-19 pandemic scrambled their investment plans.
Last February, AT&T said it would cut 2020 capex to $20 billion from $23.7 billion in 2019, and instead buy back its own shares. After Covid, analysts expect AT&T to cut capex to just $18.6 billion, a year-on-year decline of 22%. It’s smartphone sales fell by a fifth year-on-year during the first quarter.
At the same time, America’s 5G rollout is rocky, using a patch that sits atop the existing 4G network, or “5G Non-Stand Alone (5G NSA),” as Scott Fulton reported on July 3at ZDNet.
“It relies on the underlying foundation and existing base station structure of 4G LTE. By building 5G services and service levels literally into crowns that reside above or below the 4G buildouts…4G has been giving 5G a leg up. Once it’s found its footing, the idea is that 4G can begin winding down,” Fulton wrote
The “5G Non-Stand Alone” version isn’t much faster than 4G LTE except in a few very small patches of major cities, a RootMetrics study found in March.
Verizon offered a maximum speed of 627 megabytes per second in Los Angeles, enough to download several TV episodes in a few seconds, but the high speed was available in just 0.04% of the city. Verizon’s 5G speed in Chicago was just 107 megabytes per second.
AT&T’s 5G speed in Los Angeles was just 36 megabytes per second, the same as existing 4G. Streaming video works perfectly well on 4G, and the higher speeds are of use only to individuals who plan to walk around cities with Virtual Reality helmets.
Consumers aren’t willing to pay $1,000 for a new 5G-enabled phone for marginal improvements, and the US carriers have little incentive to build out networks. The US has no public body responsible for communications planning and investment.
America expects consumers to pay for 5G infrastructure they don’t really need, while China is subsidizing the buildout as the foundation for a range of technologies it calls the Fourth Industrial Revolution: telemedicine, autonomous self-directed robotics, mining by virtual reality visualization, artificial intelligence (AI) applications to the Internet of Things, self-driving vehicles, “smart cities” and so forth.
Consumers don’t need up to 100 times faster download speeds than 4G LTE to watch videos. But high-speed, high-capacity and low latency (response time) in 5G networks will transform most major industries and services in ways that analysts can’t begin to predict.
China remains by far the biggest market for 5G equipment, and, most importantly, the proving-ground for communications technologies that link to new industrial, medical and service technologies.
The discrepancy between China’s investment in 5G and America’s is so great that global communications and industrial equipment producers will continue to orient towards China.
Within a few years, the issue of 5G network security will be moot, I argue in You Will Be Assimilated, because unhackable quantum cryptography will make it impossible for anyone to read encrypted transmissions.
“Theoretically, virtually all the broadband hardware sold over the world is vulnerable to Chinese hardware hacks. But the vast surveillance capability of the US National Security Agency and its partners in the Five Eyes group will come to an end in the age of quantum cryptography,” I wrote.
The new technology, pioneered by China and field-tested with European telecom providers, creates a cryptographic key that disrupts the communications signal and alerts the participants to any attempt at eavesdropping, regardless of whether the prying spies are Chinese or American.