Some good news for suppliers, especially if you're called Huawei or ZTE. On the back of heavier-than-expected capital outlays on mobile network infrastructure during 2019, China's big three operators are now looking to spend even more this year.
5G, unsurprisingly, is behind much of the capex turbo boost.
Research firm Omdia thinks China Mobile, China Telecom and China Unicom – supported in all likelihood by a "gigantic infrastructure stimulus package" from the government – will collectively spend some 180.3 billion yuan (US$25.5 billion) on 5G equipment this year, up from RMB41.2 ($5.8 billion) during 2019.
It's a meaty increase of 338%, although percentages are inevitably inflated by last year's relatively smaller proportion of 5G capex in relation to overall mobile network spend.
Omdia calculates that total capex on China's mobile networks will rise (a still significant) 12.3% in 2020, year-on-year, to reach RMB334.8 billion ($47.3 billion).
The research company pointed out that China Mobile, the country's biggest mobile operator, has earmarked RMB100 billion ($14.1 billion) for 5G, which is a 317% hike over 2019. The plan is to add at least 250,000 5G standalone New Radios (SA NRs) at 2.6GHz and 4.9GHz.
Huawei and ZTE look set to be the main beneficiaries. In a batch of 5G contracts worth RMB37.1 billion ($5.2 billion), which were awarded by China Mobile last month, the two Chinese suppliers took the lion's share.
China Unicom has provided 5G capex guidance of RMB35 billion ($4.9 billion), which is a vaulting 343% jump over 2019 figures. The plan is to jointly build and share 250,000 5G SA NRs with China Telecom – covering all cities in China – by the end of September. Existing 5G NSA NRs are to be upgraded to standalone mode.
China Telecom, in its 2019 full-year results presentation, said 5G represented just 12% of its total capex of RMB77.6 billion ($11 billion). This year it is boosting total capital spending to RMB85 billion ($12 billion), of which 5G will account for 53%.
No dampening effect from COVID-19 then? Seems not. "Although China's economic and 5G activity is expected to have plummeted at a near-double-digit rate in the first quarter," said Stéphane Téral, Omdia's executive director, "we believe and already see signs it will recover sooner than other countries, where the spread of the COVID-19 occurred later. And because of its earlier recovery from the pandemic, people are back to work and 5G SA rollouts are moving forward with a very aggressive agenda."
Téral expects the projected total of 500,000 5G NR basestations to be deployed within the next six months. In the third quarter a new round of vendor selection is scheduled in preparation for what he called a "second massive wave of 5G rollouts."
— Ken Wieland, contributing editor, special to Light Reading