China Is Winning the Trillion-Dollar 5G War
(Bloomberg Opinion) -- China is building tens of thousands of 5G base stations every week. Whether it wins technological dominance or not, domestic supply chains may be revived and allow the country to maintain – and advance — its position as the factory floor of the world, even as Covid-19 forces a rethink in how globalization is done.
By the end of this year, China will have more than half a million of these towers on its way to a goal of 5 million, a fast climb from around 200,000 already in use, enabling faster communication for hundreds of millions of smartphone users. By comparison, South Korea has a nearly 10% penetration rate for 5G usage, the highest globally. The much-smaller country had 115,000 such stations operating as of April.
The towers are part of a raft of projects that the State Council announced last week to boost industrial innovation under the “New Infrastructure” campaign aimed at furthering “the deep integration of the Internet of Things” and the real economy. With an aim of spending $1.4 trillion by 2025, the aggressive buildup toward a more automated industrial landscape will give China a renewed advantage where it already dominates: manufacturing.
The coronavirus shut down factories and industrial sectors, triggering a rethink of supply chains – away from China. What analysts are calling “peak” globalization and the rise of factory automation could shift production to higher-cost countries in North America and Southeast Asia. It will take a while, but the global dependence on China will come down, the thinking goes. Still, with trade ravaged by Covid-19, other countries and telecom operators will struggle to match China’s spending.For China, there’s an opportunity to clear the way to forcefully implement its industrial policy agenda, without interference from criticism over subsidies and unfair competition.
Beijing’s ambitious programs are still in the construction phase. Macro base stations are the nuts and bolts of building out 5G networks, and will exceed their 4G predecessors by almost 1.5 times. Capital expenditure could peak at $30 billion this year, according to Goldman Sachs Group Inc. analysts, up from $5 billion last year. Beijing wants more local go nments and companies to get involved. Each station costs around 500,000 yuan ($71,361) and has a long value chain that includes electrical components, semiconductors, antenna units and circuit boards. The vast number of companies spawned by the project are all contributing to China’s push to get ahead.
For the industrial complex, the onset of 5G will enable greater connectivity between machines and much more data transfer and collection. Fifth-generation technology is expected to have a big impact through increasingly efficient and automated factory equipment, and tracking the movement of inventory and progress of production lines and assets. Manufacturing is expected to account for almost 40% of 5G-enabled industry output, according to Bernstein Research analysts.
From sensors and data clouds, to chips and collaborative robots and computer-controlled machinery, a whole universe of little-known Chinese companies is coming to the fore. Memory chip maker Gigadevice Semiconductor (Beijing) Inc. has ridden the trend, as has Yonyou Network Technology Co., China’s version of Salesforce.com Inc. For some of these companies, go nment subsidies are a significant part of earnings, as my colleague Shuli Ren has noted. Stock prices have surged in recent months for firms like Shennan Circuits Co., which makes printed circuit boards, and Maxscend Microelectronics Co., a manufacturer of radio frequency chips. Some are seeing their market capitalization values balloon by billions of dollars as Beijing has upped the ante on new infrastructure.
As Covid-19 absorbs the world’s attention, Beijing’s steady focus on implementing this industrial policy may make China the manufacturer of parts that most countries will need – soon. In other words, it will yet again become the factory floor, mastering the production of all things 5G.
Automation might shift production of many goods back to developed countries, but NOT the United States. We lack the technical expertise to do so. It's a shame that the USA wastes 65% of the federal budget on the Military Industrial Welfare Complex, we've lost our position as a world leader in technology.
Back in the 70's US industries first realized that they could make more profits by outsourcing manufacturing and got congress to pass laws rewarding the outsourcing with tax breaks. Now, fifty years later the US has lost so much of its industrial capacity and the costs in time and money to regain this capacity are so great that none of the companies who moved out have any interest in moving back. Corporate greed and unfettered capitalism have destroyed American industry and it will not come back.
America thinks it can hurt China by blocking the rest of the world from adopting Huawei's 5G, but all that will do is ensure that China remains the only country with advanced technology.
The difference is that China genuinely had a plan for the country to win. America does not.
Huawei's advance in the 5G technologies and China's efforts to be at the 5G forefront started with Trump's policy of putting down a Chinese private firm with the full power of his go nment
troll of cheezna
Win or not ! we, the US will not used it ! our privacy is the most important thing for everyone in the USA.
If countries do not use Chinese products for 5G they won't have 5G because there are no other countries that have the ability to manufacture the equipment to run it.
Most American political leaders are lawyers by profession.
Let's see how many more stations they can build without TSMC microchips. Long live Taiwan!
Funny fact the first 5G network was launched in Sacramento CA.
China has the best 4g, 5g network. Even the remotest corners have 4g coverage, hence the mobile economy boon.
And we are stuck debating masks or no masks :-)
no one is buying!
CHINA has no Bigger Cheerleader than Mike Bloomberg!
The American are behind on the 5G technology. That is why they are bad mouth about the Chinese now.