Phones leading the way in 5G technology in 2022
Accolrding to JBQ, 5G is much more than a faster way to stream Netflix. This technology is critical to networks that support the Internet of Things (IoT), driverless cars, and more. China may have the upper hand in the US when it comes to 5G. The question is whether the U.S. can make up that lost ground — and how that might affect companies.
Last year, roughly 15 percent of North American telecom connections were 5G. China has recorded almost 30% of 5G adoption. Additionally, a test of the fastest mobile networks in 2021 found that T-Mobile is the only nationwide US carrier to offer 5G significantly faster than 4G.
Prominent voices in the TMT (technology, media and telecommunications) industries are criticizing what they see as America’s failure to bridge the gap with China, and insist that the United States is at risk of losing its competitive advantage.
The question, however, is whether America is really behind 5G — and if so, what the consequences might be for its companies.
Former Google CEO Eric Schmidt didn’t mince words when he slammed US efforts to build 5G networks.
In a Wall Street Journal opinion piece, he and co-author Graham Allison, a professor of government at Harvard, warned of the US losing out in the future of 5G technology.
Statistics seem to back up at least some of the claims:
The 100,000 5G base stations deployed in the United States are only a tenth of the million installed in China.
China has spent $50 billion on 5G infrastructure and is on track to invest another $100 billion over the next five years. By comparison, the US government’s main public initiative for 5G expansion, the Innovation and Competition Act, authorizes $1.5 billion to be spent on building 5G networks by 2026.
Schmidt and Allison note that average 5G data rates in the United States are around 75 Mbps, compared to 400 Mbps for urban users in China.
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The difference between China and the United States in 5G
While the above may suggest that the US and its corporations are failing, the truth is somewhat more subtle.
For example, while China is leading the way in 5G connectivity today, the US could soon fall behind. Analysts predict that 63 percent of North American communications will be 5G by 2025, compared to 52 percent for China.
One reason is that American consumers generally have more spending power than their Chinese counterparts and are therefore more likely to invest in 5G phones and services. At the same time, U.S. telecom providers are seeing increased competition for future 5G revenues, which will drive faster network expansion. This is partly due to the advent of cloud-native 5G, which could become a game-changer in the US and around the world.
Finally, the two countries are pursuing very different 5G strategies. China’s leading investors in 5G networks are primarily state-owned, while private companies are leading US 5G network development.
The differences extend to M&A activities. Mergermarket M&A data shows that US carriers have made ninety-two 5G-related acquisitions in the past ten years. In the same period, China Telecom has made twenty 5G acquisitions almost exclusively within its borders.
The US remains at risk of 5G delays
Currently, the US 5G penetration rate and data speed remain second only to China.
Speed is important – including for network setup. Early access means Chinese companies have more time and incentive to innovate and build 5G-enabled solutions. Streaming-based e-commerce, gaming, media, smart city infrastructure, and many other areas require fast, low-latency 5G connectivity to realize their full revenue potential.
This is where China currently has an advantage over the United States. That’s why Schmidt and Allison’s warning about the performance of 5G is relevant to the future of technologies such as artificial intelligence, the Internet of Things, green energy, high-tech manufacturing, autonomous vehicles, VR and metaverses. Qualcomm‘s future estimates see $12.3 trillion in “5G-enabled” growth by 2035, when the value of the 5G telecom value chain will be $3.5 trillion.
Overall, China is currently particularly strong in network infrastructure and microchip foundry. These represent the top and bottom of the 5G technology stack. On the other hand, the US is generally ahead of China in terms of mobile devices, operating systems and chipset design – the middle of the technology stack.
However, the situation is by no means static. China has made advances, especially in the capabilities of its chips.
5G future market segmentation?
JBQ says, With the above in mind, a delay in 5G deployment could lead to a competitive disadvantage for the US although TMT’s rich ecosystem and consumer base suggest it may reach the domestic arena relatively quickly.
However, the two countries are simultaneously engaged in a global race for the future of 5G.
Both are working on distributing their technology worldwide. China mainly by building new relationships and depending on its equipment, funding and economic partnerships. The United States through economic partnerships and information sharing, including encouraging its partners to limit China’s use of 5G technology.
Central to this competition and the future of 5G is international standards, an area of intense Chinese focus.
China submitted 830 technical documents related to wireline communications specifications to the International Telecommunication Union last year, the most and more than the next three countries – South Korea, the United States and Japan – combined.
The setting of standards is likely to mean that Chinese telcos and tech companies will have the edge in developing 5G infrastructure, chips and software – and thus a strong position for future revenues. Because 5G not only provides telecommunications. It makes wireless networks critical infrastructure for all industries.
These developments represent a textbook example of the rise of tech nationalism BDO USA has identified as a significant trend for 2022. In the short to medium term, two competing 5G visions are likely to emerge: one centered around the United States and its allies (particularly in Europe); ) and another around China.
For telcos and companies that rely on 5G for future growth, such as technology and media, this situation has a range of 5G-related implications to consider, including:
- Regulatory: Ensure compliance and adherence to the various and evolving laws and regulations governing 5G.
- Standards: Solutions must consider multiple competing (and sometimes conflicting) standards.
- Business models: Companies continuously monitor market value propositions and incorporate flexible approaches to product and service specifications.
- Supply Chain: Comprehensive flexibility throughout the supply chain with return options.
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