4 minute read 13 Jun 2018
Asian Woman Using Mobile App on Smartphone

China is poised to win the 5G race. Are you up to speed?

By

EY Greater China

Multidisciplinary professional services organization

4 minute read 13 Jun 2018

China is determined to become a global innovation leader with local 5G connections expected to represent over 40% of that globally by 2025.

T
he remarkable growth of China’s technology and innovation in the international stage has demonstrated the country’s determination to become a global leader in the digital space. Mobile technology, as an innovation enabler, has become a focused area China hopes to command, particularly after its diversion from the global norms in the 3G and 4G era. Committing early in the standardization process will give China an edge to influence internationally and generate notable economic impact domestically.

All eyes are on China now as the country is in a leading role in the race of 5G development. The top-down national agenda that came with a series of key initiatives has provided instrumental support to create a complete ecosystem in the market – from technology R&D, equipment, network, terminals, platform, to application development. Intense engagements from the entire value chain are developing new use cases and service platforms that may serve as international test beds for 5G innovation.

China is determined to make 5G a top priority on its national agenda, striving to take a leadership role in the global landscape.
Steve Lo

China has strong determination to become a global innovation leader

China’s preparation for 5G is well underway, as it enters the third phase of 5G testing while the government has officially reserved considerable contiguous spectrum for 5G purpose. With the global unified standard set to finalize in the next year or so, China has brought forward its timetable of the commercial launch to 2019, potentially becoming one of the first 5G-ready markets in the world. 

Timetable for China’s 5G development

5G opens up new possibilities for a multitude of life-transforming applications – from 3D video to immersive media, autonomous vehicles and the enablement of smart cities, thanks to the ultra-high data rates, enhanced capacity and reduced latency. It is also the key to unlock other technologies such as artificial intelligence (AI), robotics and the Internet of Things (IoT), therefore providing tremendous potential in China that could not be underestimated.

Nevertheless, demand will build up progressively in the domestic market as it will be limited by the near-term supply of devices, equipment and compelling applications. Operators also will take a gradual approach in network deployment, thus implying a slower 5G take-up path than 4G. Adoption will take off as economies of scale builds up in the market. We expect 5G connections in China will reach 576 million by 2025, representing over 40% of that globally.

China 5G connections

576 million

Expected to reach over 40% of global consumption by 2025

Key steps to capitalize on the 5G opportunity

The promise of 5G will give telecom operators a competitive edge over the growing challenges from over the top (OTT) players. To capitalize on the new technology, they need to take essential steps from both business and technical perspectives. The ability to offer customized connectivity to support differentiated services over the more agile and flexible virtualized network, buoyed by network slicing and mobile edge computing, will be transformational. However, that requires the support of substantial fiber, sophisticated cloud and analytics capabilities, and transformed support systems. After all, 5G is a convergence play, and poised to change the industry landscape.

Monetizing 5G requires new business model innovation and cross-sector partnership in the more machine-centric environment. Imitating an OTT model has proven to be unsustainable as operators have different DNA against technology companies. They should instead leverage their strengths to engage in deep service innovation. To a further extent, the need for acquiring non-core assets, technologies or capabilities to offer new and differentiated services such as the IoT will become an important driving force to industry consolidation.

While the outlook is bright, 5G will not completely change and disrupt the telecom landscape or the industries in the short term. Operators should be realistic and learn from history to avoid over-commitment. They have to work out their strategies for 5G and move fast to deploy new services. Capitalizing on their 4G investment is important since LTE is expected to remain dominant in the fast-growing market for the next decade.

  • The road to 5G standardization

    After the 3rd Generation Partnership Project (3GPP), a collaboration of telecom standard development organizations, officially ratified the first release of a non-standalone version for the 5G New Radio (5GNR) standard in December 2017. This interim standard helps telecom industry move toward a single and global standard for 5G. Supported by a large group of operators and equipment vendors, the decision to accelerate 5GNR will facilitate large-scale trials and enable early deployments of standardized commercial 5G network sooner. Non-standalone 5GNR will rely on an operator having an existing LTE network as an anchor, while adding 5GNR carriers to boost speed and reduce latency.

    Asia has been spearheading the 5G development showcasing the technology in major sporting events like the Winter Olympics hosted in the region. Among them, China is probably the most committed across all levels. After missing the opportunities in the 3G and 4G era, China has been determined to make 5G a top priority on its national agenda, striving to take a leadership role in the global landscape. Targeting for a commercial launch in 2020, China is set to reap the benefits of its early participation in setting the standardization, building the industry chain and pushing research and implementation of 5G-related technologies.

Conclusion

After all, 5G is a convergence play, and poised to change the industry landscape. Monetizing 5G requires new business model innovation and cross-sector partnership in the more machine-centric environment. Imitating an OTT model has proven to be unsustainable as operators have different DNA against technology companies. They should instead leverage their strengths to engage in deep service innovation. To a further extent, the need for acquiring non-core assets, technologies or capabilities to offer new and differentiated services such as the IoT will become an important driving force to industry consolidation.

Summary

5G connections is China is expected to represent over 40% of that globally by 2025.

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By

EY Greater China

Multidisciplinary professional services organization