Shanghai will be the first city in China to be deployed with 5G infrastructure in China. With its USD 494 billion economy and 24 million population; Shanghai will be a critical catalyzer for the use and application of 5G.
Actually, Huawei (华为) has already begun to build China’s 5G infrastructure for the first time in Shanghai Hongqiao Railway Station, the largest railway station in the city, on February 18, 2019. However, now, the city is preparing to transform its entire infrastructure to 5G by building up to 30,000 5G base stations from 2019 on to 2021 while creating CNY 100 billion worth additional resources. There has already been deployed 228 base stations so far in the Hongkou District of Shanghai.
Major Obstacles & Solutions
Shanghai started to transform itself. However, an overall infrastructure renovation brings the necessity of updating many other related industries’ infrastructure, as well. On top of that, 5G brings its unique impediments for its implementation due to the unprecedented data stream jump compare to the previous communication infrastructure, 4G. 5G provides 15 times higher download speed compared to 4G together with 10 folds larger bandwidth.
According to 1500 telecom professionals and industry experts in U.K; spectrum availability will be the biggest obstacle for the success of 5G. Particularly, Shanghai will face the problem due to its brutally dense urbanization with hundreds of skyscrapers and multiplex city highways. Yet, Huawei is well prepared to address this biggest obstacle by particularly promoting several products for the market. Huawei provides a set of specific products to tackle down the problem. These products also cover all site forms including tower sites, pole sites, and small cells. However, it should be noted that the mentioned products have not been tested by the market yet. Tackling the spectrum problem, Huawei’s role in Shanghai’s transformation will be crucial.
Other major obstacles that Huawei will be taking care for Shanghai will be the device availability for the 5G band and proving the 5G base stations. On 24 January 2019, Huawei launched world’s first 5G base station core chip for simplified 5G, called “The Big Dipper” (天罡) The Big Dipper can support up to 200 Megahertz, that is the double range of a regular 4G bandwidth; as well as possesses 2.5 fold higher computing capacity over the previous chips. The chip is ready to use and on the market. So far, the company has won 30 commercial 5G contracts and shipped over 25,000 5G base stations globally. From the device availability aspect; there are already a number of 5G smartphones started to be marketed; LG, Samsung and Motorola are the pioneers. Huawei’s Mate X is yet another one. Huawei’s Mate X comes with Balong 5000 -a Huawei launched 5G Chip- officially unlocks the use of 5G, where applicable.
According to the survey, unclear return on investment (ROI), costs and weak market demand seen as other obstacles. McKinsey estimates that network-related capital expenditures would have to increase 60% from 2020 through 2025, roughly doubling total cost of ownership (TCO) during that period; which creates an unclear return on investment for mobile operators updating their infrastructure to 5G. Although the social and economic benefits are obvious, such as IoT and security applications; there is a financial uncertainty from the mobile operator’s perspective. What's more, when 5G network transferred to rural areas, the infrastructure investment gets tricker due to a larger area to be covered; an exponential increase in costs in the last portion of 10% of the population in the UK is postulated by Ougthan and Frias.
“... In the baseline scenario using existing capital intensity levels, coverage would reach 90% of the population by 2027 with 50 Mbps in UK, although the final 10% would see exponentially increasing costs making this proportion unlikely to be served by the market..”
Another consumer survey on 5G by Qualcomm shows that an average Chinese consumer would be willing to pay USD 32 higher price for a new 5G supported phone. However, the average price difference between a regular 4G and 5G smartphone is much higher USD 32 than the previous model prices’ for now. Which shows that the market and consumer are not as excited as and willing to spend more as the mobile operators and industry-leading companies.
Without the government support and strategic subsidies, the transition process will likely to take a longer time with painful and pricey processes for both sides of the market.
Other Major Players: China Mobile and China Unicom
Chinese telecom companies have already proceeded significant progress in 5G applications. Three major carriers -China Mobile, China Telecom and China Unicom- make up China’s telecommunication infrastructure oligopoly.
China Mobile is the biggest beneficiary of the cake. With the huge revenue, it has created from 4G, China mobile now preparing to provide a 5G infrastructure for China. Currently, China Mobile is testing and carrying out feasibility works is Guangzhou, Shanghai, Beijing and Shenzhen. The company is preparing to plant 10,000 base station by 2020.
According to a reliable source, China Unicom - yet another SOE - will be coming up with its own China 5G strategy within April 2019.
Shanghai provides an abundant and complex ecosystem for the 5G experiment of China. There are several gigantic companies providing the very core and base services of 5G deployment. Huawei is not the most important element of this matrix; i.e. Huawei’s presence is not an indispensable factor for the success of launching 5G in China. However -without a doubt- with its advanced, mainstream and relatively cheaper products; Huawei may be the biggest winner as Shanghai transforms itself to a 5G city. Not only the winner but also be a catalyzer for Shanghai, China and other developing and developed economies who wants to upgrade its communication network.
Politics aside, Huawei already has a huge market within China to carry out this huge operation.