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China Telcos & Investors Hunt 5G Economic Value

On raw numbers alone, China already looks to be winning the 5G race.

It already has the largest 5G rollout, with 130,000 basestations to be deployed at year-end, while in the first full month of commercial 5G service availability, more than 5 million phones were shipped.

But the real measure of 5G success is the economic value it creates, and that is what China telcos, investors and industry are grappling with.

Zhang Jin, a researcher at the China Center for International Economic Exchanges and co-author of a new study on 5G, acknowledged the "severe challenges" faced by operators.

These include the huge capex requirements, customers' unwillingness to pay more for 5G and a need to revamp their organizations in order to win vertical customers.

At this early stage, the three operators have issued a list of industries they are targeting, or are already collaborating with, but so far they have just a handful of projects to cite.

For example, China Mobile is helping build a "smart port" at Ningbo Port in east China, using 5G for remote control of cranes to reduce latency and cut labor costs. The operator also references a smart power plant in Jiangxi and 5G-enabled remote surgery carried out in a PLA hospital.

China Mobile points to a series of partnerships it has set up, including an IoT alliance with more than 900 members and another in video and animation, but so far none has resulted in any commercial activity.

To expand in other directions, the three operators have all established venture funds.

China Unicom announced in September that it would set up an innovation fund worth RMB10 billion (US$1.43 billion) to build a "blue ocean testing ground" and incubator.

China Mobile Investment Corp. says it will invest RMB14 billion ($2 billion) in the next year on 5G projects and startups, while China Telecom is reportedly planning a similar fund.

But beyond these they are constrained by the limitations of the China's developing economy.

Economic inefficiency is one of the reasons Beijing has been so aggressive in driving 5G. Its industrial productivity is only about 35% that of leading economies; across the economy as a whole it's around 30%.

In a recent industry speech, Bao Fan, CEO of investment firm China Renaissance, acknowledged the problems, pointing out that despite China's successes in the consumer Internet, "the US far surpasses China" in the industrial Internet.

He said that about 80% of US manufacturers use the cloud, compared to 30% in China, while 12% use industrial sensors, nearly three times the number in China, and that US firms obtain patents at a rate five times that of their Chinese counterparts.

Bao says he wants to back some 5G winners but has set some investment rules.

He will invest only in major verticals with at least RMB100 billion ($14.3 billion) in annual revenue. Each must also contain inefficiencies that 5G can exploit, and where no company has more than 20% market share.

He says China Renaissance is currently focused on several industries, including pharmaceuticals, food materials, auto parts and industrial products.

For more on this topic:

— Robert Clark, contributing editor, special to Light Reading

brooks7 12/16/2019 | 3:58:27 PM
So when there is no ROI on 5G  

Do you think that will end investing in Wireless upgrades?

 

Again, the only thing I want to know is how much my cell phone bill will be lowered if I shift to 5G.

seven

 
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