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Is 5G slowing down in China?

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By Dr Luyun Jiang, Technology Analyst, IDTechEx

China is set to be one of the biggest markets for 5G, alongside America and possibly Europe. There will be over 120 million 5G subscribers in 2022 and 1.5 billion by 2029 in China, about half of the total number globally, according to the IDTechEx’s Research report called ‘5G Technology, Market and Forecast 2019-2029’. However, we suspect that 5G is slowing down in China.

The capital expenditure plan for 2019 of three main telecom carriers in China – China Mobile, China Telecom and China Unicom – was lower than expected. China Telecom’s 9bn CNY is slightly higher than China Unicom’s of 6-8bn, and market leader China Mobile did not disclose any numbers, but it’s most likely around 17bn CNY. In total, the capax for 5G is estimated to be 34bn CNY in China in 2019, which is much smaller than expected, or 50-100bn CNY in 2019 and over 250bn in 2020.

One reason for the low expanse plan for 5G roll-out is the on-going 4G network deployment. China Mobile alone has built 350K 4G stations in 2018, more than double of the plan of 140K. On the other hand, the revenue from each subscriber is declining, as the Chinese government urges to reduce the price for subscribers to use the cellular network.
Facing the financial pressure, Chinese operators hesitate to throw money into the high-cost 5G roll-out without knowing if they will be able to earn it back. The CEO of Huawei, the top one telecom infrastructure supplier and number two smartphone provider in the world, has publicly expressed a similar concern on the payback from 5G.

It is predicted that by 2030 the direct 5G revenue in China will be 6.3 trillion CNY (about $930bn) and the Compound Annual Growth Rate (CAGR) in the coming ten years will be 29%. We expect 5G to create eight million jobs and contribute around 5.8% GDP growth in China by 2030. The indirect revenue generated by 5G will be 10.6 trillion CNY (about $1,579bn), with CAGR of 24%. Among them, the direct revenue for telecoms will be over $200bn by 2029.

As the current 5G deployment plan is slower than expected, these numbers might be overestimated. The IDTechEx Research report ‘5G Technology, Market and Forecast 2019-2029’ forecasted a moderated revenue of $160bn for telecoms in China by 2029. Nonetheless, China is still the main market to watch. It is likely that the telecoms in China will at least invest $200-350bn from 2020-2030 for 5G development, with the key focus on automotive, industry, healthcare and energy.

[Image credit: Victoria Puig for Unsplash]

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