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Telecommunications x China: Future Trends

This article discusses China's telecommunications business, which is at the forefront of 5G commercialization.


1. Telecommunications market size in China

2. Industrial structure of telecommunications business

3. Expansion of 5G commercialization issues in China



1. The size of the telecommunications market in China

 

As the Fourth Industrial Revolution accelerates around the world, competition for 5G technology development, which is expected to be an important driving force, is intensifying. By 2025, China's 5G connections will be 460 million, accounting for about 28% of the total domestic connections, and is projected to become the world's largest 5G market. 5G technology, which features "ultra-high speed, ultra-low latency, and multiple simultaneous connections," is expected to have enormous economic effects because it is applied to a wide range of fields such as smart energy, smart finance, and IoT. Edge computing, which is a technological advantage of 5G in particular, is expected to further accelerate the development of innovation.


Currently, the number of 5G-related patents of Chinese companies is No. 1 Huawei and No. 3 ZTE, boasting more than 30% of the world market share. As model cities that provide 5G communication, first-class cities such as Beijing, Shanghai, and Guangzhou are mainly selected. By the end of 2020, it is expected to cover about 340 cities above the prefecture-level cities, and China is expected to account for 70% of the world's share of 5G connections.



2. Industrial structure of telecommunications business


The three major Chinese state-owned telecommunications companies are China Mobile (China Mobile), China Telecom (China Telecom), and China Unicom (China Unicom). Following the United States and South Korea, the three companies launched 5G services in China in November 2019, and are building business platforms that utilize 5G. The company announced that it will increase the number of 5G base stations by 20% from 250,000 to 300,000 in the fiscal year ending December 2020. However, while increasing the number of base stations, there are movements to curb investment by reducing procurement costs. The Chinese government is moving to support the performance of domestic companies such as Huawei by supporting the spread of 5G for the purpose of leveraging the domestic economy that was sluggish due to the new coronavirus.

 

The biggest feature of China's telecommunications business is that it uses a stand-alone system for 5G base station maintenance. Other countries are aiming to build a network at an early stage and at low cost by adopting a non-stand-alone method that is used in combination with a 4G network. However, 4G becomes a bottleneck, and 5G characteristics such as "low latency" cannot be exhibited, so it is positioned as an intermediate stage to the stand-alone method and beyond. China, on the other hand, is expected to continue to lead the world as it has introduced a stand-alone system from the beginning that can maximize the advantages of 5G.



3. Expansion of 5G commercialization issues

 

Currently, the United States is leading the move to eliminate China because of the danger of information leakage. In July of this year, not only the US and European countries but also the Indian government banned the use of Huawei and ZTE in 5G tests. Exclusion from India, which boasts the world's second largest number of mobile phone users (1 billion) after China, is said to be a big blow to the company.


On the other hand, in Africa, where the leapfrog phenomenon, which is rapidly developing due to the introduction of cutting-edge technology, is occurring while the infrastructure such as roads is still underdeveloped, the dependence on China is increasing in the telecommunications field. China is increasing its presence in Africa by contributing a large amount of funds for the development of telecommunications infrastructure, and it is predicted that African countries will continue to become more dependent on China. In particular, 70% of 4G base stations on the African continent are made by Huawei, and considering the conversion to 5G, Huawei is unrealistic. Britain, Australia and Japan have embarked on the elimination of Huawei, but penetration on the African continent, with a population of 1.3 billion, is seen as irreversible.



If you are interested in this edition's theme or any of the Insight themes below,

please email enquiries@arches-global.com as Arches can provide a proposal fully-tailored to your needs.