Asian Market Watch: How the US-China Trade War Impacts the 5G Industry

Asian Market Watch: How the US-China Trade War Impacts the 5G Industry

The year 2020 is supposed to be a harvest year of 5G. At least market researchers and analysts were expected to see a sharp growth of the industry this year. The speed and low latency of the technology makes it well suited to power smart grids, autonomous vehicles, electronic wars, and robotic surgery.

According to IDC, the shipment of 5G devices is expected to reach 8.9% of smartphones shipped in 2020, accounting for 123.5 million devices shipped. And this is expected to grow to 28.1% of worldwide smartphone shipments by 2023.

However, when the global outbreak of Covid-19 virus started to take its toll since March 2020, all 5G activities were stalled and the world literally hit the pause button. And surprisingly (or not?), the pandemic is not the only reason that caused the slowdown of 5G deployment. The more serious impact actually comes direct from the US-China trade war.

US President Donald Trump has long accused China of unfair trading practices and intellectual property theft. And negotiations between the world’s two largest economies have proven difficult. As a result, the U.S. took actions to block China’s development of fifth-generation (5G) communications. The efforts especially taking aim at Huawei Technologies, the leading telecom manufacturer that’s now the world’s largest telecom-equipment maker and a supplier of 5G gear.

The Trump administration said it will blacklist any American company that is part of Huawei’s supply chain. It claims that Huawei is “too closeto the Chinese government and there are security issues if the company’s equipment is adopted. What’s more, the U.S. is cracking down Huawei by forcing American companies to remove themselves from Huawei’s supply chain and urging allies and other countries to exempt Huawei systems which is much cheaper than its competitors, arguing that there are potential “backdoors” for Beijing. Now, Huawei is facing major challenges in making chips and building an operating system for its mobile products.

The Trump administration said it will blacklist any American company that is part of Huawei’s supply chain. It claims that Huawei is “too closeto the Chinese government and there are security issues if the company’s equipment is adopted. What’s more, the U.S. is cracking down Huawei by forcing American companies to remove themselves from Huawei’s supply chain and urging allies and other countries to exempt Huawei systems which is much cheaper than its competitors, arguing that there are potential “backdoors” for Beijing. Now, Huawei is facing major challenges in making chips and building an operating system for its mobile products.

For example, due to the smaller coverage range of 5G stations and the practical deployment of cells, 5G comes with two modes, standalone (SA) mode and non-standalone (NSA) mode. The NSA leverages the current coverage of LTE cells. Devices will anchor on a 4G or LTE cell and then hop on the 5G service if exists. SA, on the other hand, is the full end-to-end solution of 5G that provides greater capabilities.

NSA offers a transition from 4G to 5G that utilizes existing infrastructures while saturating 5G sites. But China have chosen to start off with SA mode, which alone with the fast standard making shows China’s confidence in planning, time-to-market speed and all other aspects of 5G deployment.

Based on the fast pace of China and its authoritarian nature and other clues, it is suggested that companies such as Huawei is backed by the government to achieve such speed. As a result, it raises the doubt in the security of the Chinese 5G systems.

For 5G, the expected dominance of Huawei seems to have been averted. Governments of Asia are wavering between Huawei’s readied system and the U.S. More time has been given for other companies to catch up.

The technology war is getting political, and many Asian companies are asked to choose sides. The US rule announced could shut off Huawei’s access to the top-of-the-line chips it buys from chip-fabrication giants such as Taiwan Semiconductor Manufacturing Corp (TSMC). The ban does not only apply to the high-end chips that Huawei buys from Taiwanese fabricators for its high-end smartphones and servers, but also to RF devices that power its 5G base stations.

The technology war is getting political, and many Asian companies are asked to choose sides. The US rule announced could shut off Huawei’s access to the top-of-the-line chips it buys from chip-fabrication giants such as Taiwan Semiconductor Manufacturing Corp (TSMC). The ban does not only apply to the high-end chips that Huawei buys from Taiwanese fabricators for its high-end smartphones and servers, but also to RF devices that power its 5G base stations.

X Creative Media, a localization and digital marketing expert based in Asia, provides first-hand market information, insightful analysis and local knowledge about Asia and the world.