Daily Management Review

US and China start 5G race


China and America have opened a new front of fight. Now they are fighting for leadership in the multibillion-dollar market of 5G.

Kārlis Dambrāns via flickr
Kārlis Dambrāns via flickr
The market of virtual information is one of the most dynamically developing ones. Engineers and scientists are constantly increasing the speed of data transfer. Now the next generation of communication is 5G. Producers of telecommunication equipment promise that it will be 100 times faster than 4G. It opens new opportunities, and, obviously, promises huge money, and so it is not a surprise that the US and the PRC are preparing to fight for this.

In July, Huawei Technologies Co. celebrated successful completion of work on one of the main components of the 5G. The invention of the Turkish scientist Erdal Arikan promises billions of dollars to the Chinese IT giant, as well as another step towards Chinese domination in the new very important market.

Of course, American engineers do not sit idly either. They also have enough work. Last year, Verizon Communications Inc. began testing a new technology, which also promises to be a breakthrough. Nokia Corp., for example, also counts on huge revenues from its technologies, on which it began to work back in 2007.

The interest of businessmen in 5G is understandable. In spite of the fact that everything is still not clear with the technology, it obvious that patriotic owners will receive huge incomes.

There is also nothing surprising in the interest of authorities. The ultra-high-speed 5G will give an advantage, for example, to special services and military countries, which will be at the forefront of its development.

Most experts believe that China is still ahead of the US in the race for 5G. Back in 2013, the State Council created a special committee that coordinated work on 5G technologies. State support combined with huge domestic markets gives Chinese companies such as Huawei considerable advantages in this race with American and European competitors.

Over the ocean, the government traditionally prefers to interfere less with the activities of the private sector. In America, in the forefront of the development of 5G are IT-giants such as AT & TInc., Verizon, Samsung Electronics Co. and Nokia.

Last week a number of IT companies, including Intel Corp. and Cisco Systems Inc. appealed to the US sales representative and said that raising tariffs on Chinese routers and other telecommunications equipment would slow the development of 5G.

The three largest operators are planning to start providing 5G services in a number of cities at the end of this year, despite the fact that most devices and equipment for working with 5G will appear only at the beginning of next year.

The White House may be trying to interfere less with activities of American companies, but this, of course, does not mean that the administration does not help its businessmen. In March this year, for example, the White House blocked acquisition of American chip maker and one of the leaders in the development of 5G, Qualcomm Inc., by the Singapore-based Broadcom IT company. One of the reasons was the fear that Broadcom would cut back on research funding, which would push Chinese companies further forward.

In July, Beijing has already tried to prevent Qualcomm from acquiring the Dutch chip maker NXP Semiconductors NV in order not to let competitors in new markets.

By the way, the US Congress recognized in 2012 that Huawei together with ZTE Corp. posed a threat to US security, fearing that their equipment has installed spyware. In August, Australia followed the example and banned Chinese companies from developing the 5G network on the Green Continent. Other US allies are expected to follow suit.

Beijing is ready to respond and is now ousting the US IT companies from the Chinese market 5G. The Chinese leadership took the development of 5G seriously after it lost a race in the development of mobile networks to the West. If the 3G networks were dominated by Europeans, then the 4G were led by Americans. This domination greatly contributed to success of companies such as Apple Inc. and Qualcomm.

Results of the increased attention of the state are evident. After 2015, in China, according to Deloitte, had 350 thousand base stations, and less than 30 thousand were noticed in America. Even taking into account the huge Chinese population, there are 14.1 base towers for every 10 thousand inhabitants, and in the USA - only 4.7. Meanwhile, the number of base stations for the development of 5G is extremely important, because they require much more base stations than 4G does.

The physical manifestation of the Chinese leap in this area is a huge state laboratory in the vicinity of Beijing. It is believed that the Chinese 5G will be ready for commercial use already in 2020.

Not surprisingly, the US agency National Science Foundation, which is trying to coordinate efforts to develop the 5G, believe that America lags behind in the development of 5G from Europe, South Korea, Japan and, of course, China.

source: wsj.com