The number of new 5G connections in 2020 exceeded 200 million, and the terminal ecosystem gradually took shape

MWC Shanghai 2021 has opened grandly. Its first online and offline combination marks the beginning of a new era of interconnection and collaboration in the mobile industry. This year's MWC Shanghai is expected to welcome 20,000 participants through summits and forums held at the Shanghai New International Expo Center.

The theme of this year's conference is "Harmony and Coexistence". GSMA said that mobile technology is profoundly affecting social and economic development, and we are at a critical stage of the explosion of 5G connection technology. The historical mission of 5G is to empower thousands of industries and promote the digital transformation of society.

John Hoffman, CEO of GSMA, said: "2020 has been an extraordinary year and we have experienced tremendous changes. The enabling effect of mobile technology has played a huge role in various industries and economies. The next 10 years will be a critical 10 years for industry development. We believe that 5G will continue to drive all industries to accelerate transformation, improve efficiency and productivity, and it is also a good opportunity to promote social progress."

GSMA think tank predicts that by the end of 2020, there will be 149 operators in 57 countries and regions in the world that will commercialize 5G networks, and China's 5G connections have exceeded 200 million, far ahead of the world. In terms of industry applications, 5G has been widely used and fully blossomed in smart factories, steel, ports, transportation, autonomous driving, medical care and other fields.

4G reaches its peak, 5G gradually gains momentum

With the rapid development of 5G in China, the Chinese market has become one of the global leaders in 5G applications. According to statistics, in 2020, the number of new 5G connections in China exceeded 200 million, accounting for 87% of the world's 5G connections. The expansion of 5G applications in China has benefited from active network deployment and a growing terminal ecosystem.

Despite the impact of the COVID-19 pandemic in 2020, Chinese operators still deployed approximately 600,000 new 5G base stations and announced plans to deploy more 5G base stations in 2021, with investment enthusiasm remaining unabated. At the same time, 5G networks have covered more than 90% of the population in Hong Kong and Taiwan, making them the first markets in the world to reach this milestone.

From a broad perspective, the actual mobile market has seen a slowdown in user growth and market saturation. GSMA told reporters that by the end of 2020, 1.22 billion people in China will subscribe to mobile services, accounting for 83% of the country's population. Compared with the global average adoption rate of 66%, China has become one of the most developed mobile markets in the world. However, the increase in market saturation also means a slowdown in user growth, which is also common in other developed markets in the world.

"4G is currently the mainstream mobile technology in China, but it has reached its peak, while 5G penetration continues to grow rapidly," said a GSMA spokesperson.

According to the GSMA think tank's "2020 Consumer Focus Survey", Chinese consumers are more eager to upgrade to 5G than consumers in other markets around the world. This is due to the continuous increase in sales and share of 5G devices in mainland China. In 2020, 5G smartphone sales were 163 million units, accounting for nearly 53% of total smartphone sales. It is estimated that by 2025, 4G will account for 53% of China's total connections, while 5G will account for 47%. These two technologies, 4G and 5G, will dominate China's mobile access network in the next five years, and the technology networks before 4G will be gradually shut down.

The rapid growth of 5G mobile phones has become an irreversible trend, and China has become the global manufacturing center for smartphones. China currently has many of the world's top mobile phone brand manufacturers, such as Huawei, OPPO, vivo, realme, Xiaomi, etc. With a rich product portfolio and price advantages, Chinese OEM manufacturers have steadily expanded their market share in the past five years. For example, Honor smartphones are very popular in the Russian market; Shenzhen-based Transsion is a leader in the African market; in October 2020, vivo expanded its business scope in the European market and successively entered the markets of France, Germany, Italy, Poland, Spain, the United Kingdom, the Czech Republic and Hungary.

Data from the China Academy of Information and Communications Technology (CAICT) show that domestic smartphone shipments fell 20% in 2020 due to manufacturing disruptions, weak demand and delayed releases of new models caused by the epidemic. However, the production of domestic manufacturers has basically returned to normal, and the number of mid- and low-end 5G phones has begun to increase, which will affect 5G applications in China and even the world.

5G construction capital expenditure increases, revenue forecast optimistic

对于5G网络建设的投入上，即使2020年第一季度的业绩影响较大，可是中国三家移动运营商已经实现在年内扭转颓势，营收状况显著好转。疫情(及随之而来的大范围封锁和零售业关闭)一度导致收入减少，手机销售萎缩，但是这种负面效应已经缓解。与此同时，5G业务量不断增长，支持营收趋势向好。

GSMA predicts that by 2025, the total revenue of China's domestic operators will achieve a compound annual growth rate (CAGR) of 2.0%, reversing the negative growth trend between 2014 and 2019.

China's domestic mobile operators are expected to invest nearly $210 billion in network construction between 2020 and 2025, 90% of which will be invested in 5G. In mainland China, operators are rapidly deploying 5G infrastructure. According to the Ministry of Industry and Information Technology (MIIT), the total construction of dual-mode 5G base stations increased by about 200,000 in the last quarter of 2020, bringing the total to more than 700,000.

"The number of 5G infrastructure in mainland China has jumped to the top of the world, reflecting the national policy of promoting 5G applications through network construction." An industry analyst said. It is also worth noting that mobile operators in Taiwan and Hong Kong have also increased their 5G investment, with the goal of achieving 99% population coverage in the next two years.

In 2020, the progress of 5G network construction was mixed. The epidemic slowed down the pace of some countries, but some countries accelerated it. In India and Spain, the 5G spectrum auction was postponed due to the epidemic. However, in South Africa, Sweden and other countries, facing a surge in demand, operators launched 5G services ahead of schedule after obtaining additional spectrum to expand capacity. As of January 2021, there are 144 5G commercial networks in 57 countries around the world, with the number of 5G connections reaching about 235 million.

China is one of the most advanced regions in 5G. In 2020, 5G in mainland China grew strongly, becoming the world's largest 5G market. By the end of 2020, the number of 5G connections in mainland China accounted for 87% of the total number of 5G connections in the world. In Taiwan, the number of 5G connections reached 1 million in December 2020, the fifth month of 5G commercialization. In Hong Kong, 5G networks now cover more than 90% of the population. China's 5G growth is due to policy support, operators' vigorous deployment of infrastructure, and a thriving terminal ecosystem. In 2020, more than 200 5G terminals have been launched in the country.

Some industry experts believe that the development of 5G is capital-intensive for operators, given the intensive requirements of the technology, especially in high-frequency bands. As one of the global leaders in 5G deployment, Chinese operators have adopted infrastructure deployment models (such as network co-construction and sharing) to bring it to market. China Telecom and China Unicom jointly build and operate more than 320,000 5G base stations across the country, which is the world's largest 5G commercial network co-construction and sharing agreement, covering more than 300 cities. As of September 2020, this move has helped operators save RMB 60 billion (US$9.3 billion) in capital expenditures, and is expected to help operators save another RMB 270 billion (US$41.8 billion) in the next five years.

Mobile operators are actively looking for market opportunities in vertical industries. At this stage, vertical industries such as manufacturing, transportation, and healthcare are particularly interested in 5G solutions. The development of 5G in the government and enterprise market mainly relies on independent (SA) networks, so as to give full play to the unique capacity advantages of 5G, such as highly reliable and low-latency communication (URLLC) and network slicing.

In the second half of 2020, China announced a series of major news around 5G independent networking, and further developments are expected in 2021. In November 2020, China Telecom announced the commercial operation of 5G independent networking, which can ensure the security of network slicing and the latency is less than 5 milliseconds. At the same time, operators in the United States and Europe, especially those in Northern Europe, are also moving in the same direction. They are working with manufacturers and corporate groups to carry out pilot and commercial deployment of 5G industrial applications, which will be a representative of 5G empowering thousands of industries.

In addition to the 5G private network on the way, the global IoT market is also developing and changing rapidly. In 2020, the COVID-19 pandemic had a huge impact on China and the world, mainly due to economic uncertainty affecting the supply chain. However, the pandemic has also accelerated the trend of digital transformation as companies seek to improve productivity and efficiency. People are re-enabling or creating new IoT solutions to solve the immediate challenges facing companies, such as ensuring employee safety and complying with epidemic prevention regulations, which have brought short-term growth opportunities.

Interestingly, GSMA told reporters: "In China, two out of every five companies plan to deploy a new IoT project within 12 months, and its urgency is second only to the United States."

In 2020, relying on the 4G network foundation, Chinese operators invested heavily in building narrowband Internet of Things (NB-IoT). In June 2020, China Mobile said it would deploy 118,000 narrowband Internet of Things base stations across the country, and the total number will reach 350,000 by the end of the year. Focusing on the opportunities brought by the digital transformation of global enterprises, Chinese operators are also exploring emerging IoT markets overseas.

"Thanks to the heavy investment from operators, 5G and NB-IoT will dominate China's mobile Internet of Things," said a person from an IoT chip module manufacturer.

Seize the opportunity of digital transformation

The COVID-19 pandemic has had a significant impact on China's economy. In order to curb the spread of the virus, the government has imposed social restrictions, which have disrupted existing supply chains and forced companies to seek new ways of operating. In this context, the mobile communications industry has become a lifeline for society, enabling many economic activities to continue, even during the peak of the pandemic, and mitigating the impact of social restrictions on economic output.

One day, the pandemic will end and the world will enter a phase of economic recovery, with mobile technology playing an even more critical role. By 2030, 5G upgrades and the new services they bring will contribute more than $600 billion to the global economy each year. This will account for about 2.1% of the expected revenue growth across all industries and sectors over the next decade. GSMA estimates that the benefits of 5G will be concentrated in manufacturing, services and retail over the next decade. These industries will contribute nearly a third of the $600 billion in new global economic growth.

Digital transformation has become a consensus across society, with governments and businesses increasingly relying on digital technologies supported by high-speed connections to improve work processes. The pandemic has disrupted traditional social and business activities, and this trend will accelerate over the next decade. Therefore, effective policies must be formulated to support the new digital era that will emerge after the pandemic.

For the development of 5G mobile networks, it is necessary to fully tap the potential of 5G in private networks in order to better create a smoother basic connection road for all walks of life.

In July 2020, China Mobile announced plans to assist enterprises in building 5G private networks, covering 15 industries including manufacturing, medical, automotive, and ports. China Telecom has vigorously promoted its cloud-network integration strategy to strengthen its competitive advantages and capabilities in serving vertical industries. For example, in Qingdao's smart grid project, China Telecom played a key role in the implementation of this project by relying on a section of its 5G SA network. China Unicom provides virtual, hybrid, and private network products, focusing on converged media, industrial Internet, transportation, education, health, and tourism. China Unicom also provides dedicated networks for the mining industry, greatly improving the efficiency and safety of underground operations.

For enterprises and other end users, private networks promise to improve security, control and flexibility of key network functions such as coverage and capacity. Operators working closely with equipment vendors to identify and address real problems faced by vertical industries is critical to developing new enterprise use cases to improve efficiency and safety and support a clean environment.

The development of mobile networks represented by 5G technologies is profoundly affecting social and economic development. In the post-epidemic historical journey, how to seize opportunities will be one of the key topics for the entire industry.