The Spring Festival came early for the Chinese 5G.
On November 1, China unveiled its 5G network ahead of 2020 scheduled launch. China Telecom, China Unicom and China Mobile all unveiled the 5G network that starts with about 128 Yuan ($18) per month.
It has been a race to the finish between China and the U.S. in developing the 5G network. And it appears China has beaten the U.S. to it.
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Apart from South Korea, China is the only other country to have a national 5G rollout. 50 cities in China, including the highly populated Beijing, Shanghai, Guangzhou and Shenzhen, have a total coverage while the U.S can only boast of a few covered cities.
In the face of a trade war between the U.S. and China, it’s a big win to the Chinese tech industry. Huawei’s hope of leading the 5G pace globally was dashed when the U.S. Government accused the company of using its equipment to spy for the Chinese Government.
All effort to refute the allegation did nothing to quell Huawei’s ouster from the United States’ market, a heartbreaking situation for the mobile phone makers which also has deepened the grudge between the two countries.
But the trade war seems to have inspired China’s push to lead the global quest for 5G network. China Telecom, China Unicom and China Mobile are all state-owned carriers with uniform services offers – 599 Yuan per month for 300 gigabytes of data and 3,000 minutes of calls: A precedent for the biggest 5G network in the world.
According to mobile industry body GSMA, China is expected to account for the largest number of 5G connections by 2025, commanding a staggering coverage bigger than North America and Europe combined. In 2020, 110 million users are expected to join the Chinese 5G network.
In the U.S. AT&T, Verizon, T-Mobile and Sprint have succeeded in establishing 5G network in a few cities, while Ericsson leads the charge in developing the infrastructure. The gap created by the slow pace of the U.S. to catch up with China in the tussle for global 5G leadership can only be bridged by the potential challenges in China. Pricing, 5G smartphones and convincing users to leave 4G for 5G are among the challenges highlighted to hinder the progress.
Although the services so far have been priced cheaper than 4G on a per gigabyte, there is fear that the price may eventually get too high. Comparing China’s price with South Korea’s, Edison Lee, a Jefferies Analyst said analysts are surprised that China’s 5G services per gigabyte are almost the same with South Korea’s, even though the former has a lower per-capita income.
“We are amazed China’s 5G price plans give an average US $0.39 price per GB that is almost identical to Korea’s US $0.38,” said Lee.
“As China’s per-capita income is 69 percent below that of Korea, similar pricing would likely mean China will have a lower penetration than Korea,” he added.
Talking about the availability of fifth generation phones, there are limited numbers out there considering the number of users expected to embrace the network.
Huawei has Mate 20 X 5G and Mate 30 devices, and there is Samsung Note 10+. Chinese phone producers, Xiaomi, Vivo and ZTE seem prepared to embrace the evolution of 5G with some devices, but they are not enough.
The unavailability of 5G enabling devices is a problem as much as convincing 4G users to move to the fifth generation network. Senior partner at advisory and investment firm Delta Partners, Vinod Nair, told CNBC:
“The real issue is: What does the consumer really see as the big difference between 4G versus 5G?… for a lot of what consumers do today: Very little, there won’t be much difference. That is why it is more challenging on the consumer side.
“Right now, the launch in the consumer market is on a large scale, the sheer number of cities and amount of 5G sites rolled out is quite massive in terms of this scale. That itself will ensure the initial experience is good.
“That, coupled with the pricing, as well as the handset subsidies, should make it easier to upgrade. Having said that, if the upgrades aren’t attractive it won’t be a fast upgrade cycle,” he added.
The U.S. chances to close the gap, right now, can only be narrowed to these challenges. But the crux of the matter remains that the U.S. itself will have the same challenges to contend with especially pricing. And time would have provided a long edge for China to trial and fix the loopholes while the U.S. is dealing with the beginner challenges.