Will China's massive lead in 5G subscriptions change the world?
At the end of 2020, there were 220 million 5G subscribers in the world, 80% Chinese. This could have huge consequences on who takes the lead in the race for new technologies in the 2020s.
With the COVID crisis, the raw between the U.S. and China about Huawei and 5G had disappeared from the top of the news. Then came a relative "detente" in the commercial tensions between the two countries. In the meantime, China kept moving fast on 5G, while Europe and America saw their commercial deployment plans slowed down by the pandemic.
At the end of 2020, according to the Ericsson Mobility Report, the number of 5G subscriptions in the world could be estimated to 220 million, ahead of previous forecasts, due to a boost in China. The market data were showing a massive gap between China and the rest of the world: 80% of the world's 5G subscribers would be Chinese! We are talking about 175 million Chinese people having a 5G subscription, with a monthly addition of 15 to 20 million per month in the last few months, on track for a 20% penetration rate in China by the end of 2021. This compares to a mere 6 million in Europe and 14 million in North America, while South Korea has reached 12 million.
There are conflicting views about the way China is counting the number of its 5G subscribers and it might be overestimated though. Some of the subscribers have migrated to a 5G package but are still using a 4G phone, as explained in the IEEE blog here. Nevertheless, with 5G packages now in the vicinity of $15 dollars per month and a growing offer of terminals available, it might be just a matter of months before that subscriber base really uses 5G. China also has 700,000 5G bases, 80% of the world's total, which is consistent with the % of 5G subscribers in the world.
Is this just a temporary gap in deployment and the rest of the world will quickly make up for it? After all market forecasts are optimistic about the adoption of 5G and predict that by 2025, there will be around 1.8 billion 5G subscriptions worldwide (source GSMA) with developed Asia and North America leading the way.
According to an earlier GSMA 2020 Mobile Economy report, South Korea was still forecasted to lead the way, but the technology mixes of China and the U.S. could look relatively similar in 2025, with Europe lagging behind:
But as of today, China is way ahead of the U.S. and Europe in the adoption of 5G. It is probably a matter of motivation.
The South Korean and the Chinese are the most excited when it comes to 5G. It is unclear why other countries are less motivated and whether it is a matter of innovation fatigue, health concerns, or a lack of understanding of the added value brought by 5G.
In Europe, particularly, people are not massively interested and they are yet to be convinced.
All that translates into the early adoption curve.
There are three major consequences to this early Chinese lead:
- economies of scale, that could give a further edge to Chinese 5G infrastructure companies in the world, particularly in developing countries in South East Asia, Africa, and South America where investment costs matter even more. That is a direct threat to other manufacturers such as Ericsson, Nokia, or Samsung,
- going full speed in the deployment of 5G might give China an edge in R&D and applied research in the new technologies that depend a lot on 5G such as autonomous cars or virtual reality. This is an opportunity for China to take a technological lead that use to be the privilege of U.S. big techs, extended sometimes to their Asian allies, Korea and Japan,
- the already massive customer base (more or less the equivalent of the whole population of Germany + France + the Netherlands + Belgium) will give a fantastic commercial edge to all the developers of new apps, games, devices related to 5G, ensuring them a potential market, client feedbacks and a field of experimentations that we do not have yet in other countries. The first-mover advantage in 5G gets to China so far. That might be the opportunity for China to finally enter new developed B2C markets - particularly in Western Europe - that were not that easy to reach before, given the image of Chinese products.
Is this anecdotical - a market gap that will close within 2-3 years - or is it symbolical of a leadership shift from the King of the 4G times, the U.S., to the King of the 5G times, China?
We will know more about this by monitoring how the rest of the world keeps up with the 5G growth.
Let us not forget that each industrial revolution has its network: the railway network for the first one, the electricity network for the second one, the satellite networks for the third one. The fourth industrial revolution is based on the internet. Whoever has the best domestic network to support its economy may take an edge over its rivals. China is well-positioned today with the 5G mobile internet network, both in terms of infrastructure providers and commercial traction. This will reinforce its economic speed in the decade when the country is supposed to take over the U.S. as the main economic powerhouse in the world.
On this same issue, an interesting article by C Net about Chinese ambitions with 5G and leadership: https://www.cnet.com/news/5g-will-change-the-world-and-china-wants-to-lead-the-way/
For the last news about the 5G ecosystem, you can also check the GSMA website here: https://www.gsma.com/futurenetworks/ip_services/understanding-5g/5g-innovation/
And for further reading, the complete GSMA 2020 Mobile Economy report with some insight about how mobile communications enable a low-carbon future:
And the Ericsson Mobility Report of November 2020, with an interesting insight about the impact of 5G on autonomous cars or gaming: