Impact on 5G Market due to China Geopolitical Situation


The 5G Market has created a lot of excitement in the ICT sector, however, this technology has also gained a lot of negative publicity. A former Canadian diplomat ‘Michael Kovrig’ has found himself in the middle of a diplomatic controversy. Kovrig was detained in Beijing by Chinese authorities for “endangering national security” in December 2019. His arrest came days after Canadian officials detained Chinese telecom giant Huawei’s Chief Financial Officer Meng Wanzhou for extradition to the United States on charges of conspiracy to violate American sanctions against Iran and theft of intellectual property of a competitor known as ‘Tappy – the robot’ developed by TalkTalk. Since then the attack and counter-attack cadence between China and the U.S. has not diminished. Huawei launched lawsuits against the U.S. in March 2019, requesting a declaration that import laws are unconstitutional. President Trump announced an emergency state of national security in May 2020, adding the firm to the Organization List, banning Huawei‘s supply of U.S. equipment.

5G necessary in COVID-19 lockdown

Today Artificial Intelligence, Big Data, and the Internet of Things are significantly expected to play key roles. The advantages of 5G technology are expected to be a major factor of a future rivalry for great power. According to the market database, technology is arguably the only winner in the chaos created by the Covid-19 pandemic. Healthcare, companies, families, schools, governments are all now dependent on technology. Operating from home to G20 meet technology allows a lockdown working environment.

The rise in technology usage in telecommunications highlights the need for a 5G network more than ever before. The anticipated exponential growth in data traffic, growing machine-to-machine links across different sectors, 5G monetization partnerships and alliances, and rising adoption of Internet of Things (IoT) devices are expected to boost demand for 5G. Though 5G provision would not be without its fair share of geopolitical ramblings. Geopolitical disruptions caused by the pandemic are likely to either dampen or stall China’s ambitious global 5G strategy, which is also vital to its Silk Road plans.

5G – A Revolution

According to the market database, unlike previous generations of mobile technology that integrated one key innovation alone, 5G Market is expected to introduce many innovations. This would improve cellular network capacity and broadband up to 100 times faster than 4G. It would also allow massive device connectivity, providing ultra-low latency communication immediately and uninterrupted. 5G includes both improved efficiency and its groundbreaking short- and medium-term applications. This would grease the wheels of other primary innovations of the Fourth Industrial Revolution such as the Internet of Things (IoT), smart cities and smart agriculture, telesurgery, and virtual reality. It will, therefore, have consequences that go well beyond the technical aspect.

5G may cause major short- and medium-term competitive advantages on the economic front. Globally it will produce economic production of USD 12.3 trillion and sustain 22 million jobs by 2035. China has continued to press ahead with its search for 5G supremacy and hoped to launch it commercially in 2020. It built a trial network of 350,000 cell sites in 2018, which has grown over the last two years. The nation will be the largest 5G market with 430 million subscribers after an investment of USD 400 billion in 2025. ‘Huawei’ a Chinese company has been at the forefront of this matter. The firm is now a pioneer and icon of Chinese creativity and ICT advancements. It surpassed Apple as the second-largest smartphone vendor in 2018 and is expected to exceed Samsung’s market share by 2020.

5G Security and privacy issues:

According to the market database, 5G would also give rise to security and privacy issues. As critical industries like autonomous vehicles, health care, or industrial processes become more dependent on wireless networking, they would become more vulnerable to cyber threats. Risks such as remote sabotage of medical equipment or cyber-attacks on vehicles would become a reality. This creates a higher than ever need for strong security measures. 5G and the predominance of China in the area have increased concerns for Western nations. They raised the same concern in the political and judicial arena under fears of intellectual transfer and loss of control over determining norms. Australia prohibited Huawei and ZTE from supplying 5G Market equipment citing security issues while New Zealand followed the same suit. United Kingdom, France, Germany, Poland, and the Czech Republic share the same concerns and have considered banning Huawei. They all cited the possibility of interference by the extrajudicial state.

Cost of 5G Delay

According to the market database, a delay in the implementation of new 5G technology at a national level may also lead to reduced domestic economic growth, harm to the competitiveness of local companies on foreign markets, and delayed economic and social benefits. Global telecommunications companies are engaged in a race to set standards and dominate audiences, despite the economic stakes associated with 5G. Huawei’s Rotating Chairman Ken Hu announced in March 2019 the company had signed 40 commercial contracts to develop and operate 5G telecommunications networks in different parts of the world.

Figure 1: Huawei’s Global 5G Market Footprint

A loss for Huawei would potentially be again for Ericsson and Nokia networks. Yet this claim ignores the high buyers’ prices as Huawei aggressively competes on price. It is estimated that if Huawei is removed 5G deployment in Europe would cost USD 62 billion more. And in a post-COVID world, the role of the cost would be even more given the depleted government and business reduced finances. In such a scenario it is an opportunity for India to fill the network gap.

Opportunities for Global Telecom Players

According to the market database, the recent past has seen a couple of significant developments over the Indian 5G Market. Airtel is a Huawei promoter that has inked a USD 1 billion contract with Nokia, while uncertainty prevails about Huawei‘s connectivity to improve and extend its 4G network, which would also be used for potential 5G applications. ‘Reliance Jio’ India’s largest telecommunications firm has also claimed to have built its 5G software in-house. Jio has also openly announced recently that it is the only company in the world that does not use any Chinese hardware in its 4G and 5G networks and will continue to do so.

All such events indicate increasing difficulty for Chinese 5G plans globally as it faces the campaign led by the US. In August 2020, US BIS (Bureau of Industry and Security (BIS) in the Department of Commerce (Commerce) announced the addition of 38 affiliates of Huawei to the Entity List. As the geopolitics unravel throughout the pandemic one would not expect the market to get any better affecting the 5G sector. China has pushed up the military intervention in the border area of the East China Sea, South China Sea, Taiwan Strait, Hong Kong, and India-China border region. The global community, especially the investors on the receiving end of the military action, and the West that cares about international regulations and human rights are unlikely to ease their position anytime soon if the pandemic animosity persists. Business Leaders, Investment Bankers, and consultants interested in the 5G market could use Global Market Database to stay up to date with the dynamic market environment.