What 5G Race? and US vs. Huawei (Robert Clark @ Light Reading) ...
We are so early into 5G that we still know very little about how this is going to play out.
>> Just which 5G race are they talking about?
Robert Clark
Asia News Analysis
Light Reading
June 09, 2020
lightreading.com
We are in one of those rare periods when a new telecom technology is at the center of global attention. Yet there is a big disconnect between the 5G "debate" and what the industry is actually doing.
5G is invariably cast as a "race" between the US and China, usually as one that China is "winning."
That's not totally false, and we might also acknowledge that one thing they agree on is that 5G is a huge deal.
Both sides embraced the maximalist view that 5G is going to transform industry, modernize the economy and ensure military ascendancy.
Some of those predictions also turn up on the slide packs of industry executives, but those with actual P&L responsibility for 5G are the first to acknowledge these are just assumptions.
Anyone who remembers the ridiculous 3G valuations will be cautious about these aggressive 5G forecasts, especially from those with a political interest in talking them up.
The "race" that is commonly spoken of is the vendor/technology/network deployment race, which tends to get conflated into one thing. Just framing it that way puts Huawei and China in the lead thanks to volume.
But this discussion misses services and applications, which is the largest part. To the extent it is acknowledged, dominance in network kit is assumed to guarantee services success – but that doesn't follow any more than building airports ensures aviation "dominance."
We are so early into 5G that we still know very little about how this is going to play out.
In pioneering South Korea, people are using more data, and some of the AR and streaming services seem promising, but it is hard to identify compelling new apps or changed consumer behavior. After 12 months, SK Telecom's ARPU has moved by just 1.9%.
In raw numbers China is certainly winning the "race." Operators have deployed more than 250,000 basestations and are claiming some hefty subs numbers. But a huge slice of these – perhaps two-fifths – are 4G users with 4G devices on 5G packages. (See China's 5G subs may be overstated by 40%.)
Operators gain nothing financially from these customers, learn nothing from their behavior, and clog up their 4G networks with users on outsize data plans. That's not winning any kind of race.
Equally unsurprising, despite the rich new network functionality available to them, operators have already resorted to price competition. China Mobile has just trimmed its basic package from 139 yuan ($19.70) to 99 yuan ($14).
China's state monopolies and micro-management may yield impressive supply side results, but they are hopeless at creating bold new services. Competition between operators is so stunted that regulators now set them mandatory annual targets for price and network performance.
China's 5G doesn't have the additional competitive impetus and innovation that Europe and the US will see from CBRS or private networking. As in 4G, the government and the operators will rule the airwaves.
This will be even more true on the enterprise side. China is a low-productivity economy that doesn't know how to take advantage of new technology. In 2018, the China cloud market was just 8% that of the US.
Next time you see someone talking about the 5G "race," it's worth figuring out just which race they mean. <<
>> US vs. Huawei: Be careful what you wish for
Robert Clark
Asia News Analysis
Light Reading
June 10, 2020
lightreading.com
Huawei could run short of key chips for its networking gear by early next year, as US sanctions take their toll.
The Shenzhen-based vendor is uncertain if it can even fulfill its existing contracts to supply 5G kit to operators in China and around the world, Bloomberg is reporting.
So, the latest and harshest round of Huawei bans is already having the desired effect. But be careful what you wish for.
If Huawei can't fulfill its 90-plus 5G contracts, the result will be messy and costly for operators.
Presumably those telcos will be forced to turn, directly or indirectly, to Nokia, Ericsson, Samsung and/or NEC, and pay whatever it takes. Neither they nor their governments will thank Washington for that.
Even Attorney General Bill Barr is asking just whose equipment are telcos going to buy if they are warned off Huawei.
More than that, the blowback from this kind of total ban could mean long-term harm to the US chip industry.
China accounted for 23% of global semiconductor demand in 2018. Since the US-China trade war began, average annual growth for US chip firms has declined from 10% to around 1%, Boston Consulting Group points out.
It argues that under current restrictions US firms could lose 8% of global share and 16% of revenue. If the US enforces a total semiconductor ban on China, this could rise to 18% of global share and 37% of revenue.
These falls in revenue would mean cuts in R&D spending, capital investment and jobs.
So even allowing for the need to push back against China's forced technology transfers, IP theft and extensive state subsidies – not to mention its alarming penchant for hostage-taking – there are good reasons for trying to cut a deal.
The phase one trade agreement in January did include some measures relating to technology transfers and IP theft, though nothing on subsidies.
But the impact of the latest Huawei measures means the US could return to the negotiating table in a position of strength.
China's efforts to build a world-class chip industry go back to the 1950s.
A recent Brookings Institution research paper says the national champion, SMIC, is around five years behind the world's leaders.
SMIC and the next-biggest firm, Unigroup, received state subsidies equivalent to 40% and 30% respectively of total revenue between 2014-18.
That's not much of a result. In aggregate, China accounts for just 3% of global capacity in advanced chips.
But some analysts believe this may change as the nation turns toward domestic suppliers as a result of the Huawei bans.
In a scale game such as chips, money makes a difference. There's an avalanche of cash waiting to be tipped into the sector. Last year the government created a new $29 billion national IC fund, and Brookings says at least $80 billion has also been raised through provincial and municipal funds.
It might be too much to expect reasonable compromise from either national leader at this stage. But giving Huawei a little breathing space might be better than trying to kill it off altogether. <<
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- Eric L - |
