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- There’s a growing consensus that China could use its lead in 5G to leapfrog Silicon Valley.
- Microsoft, Amazon, and Google can compete by focusing on software and partnering with carriers.
- The Biden administration has indicated its support for 5G initiatives that could turn the tide.
- Visit Insider’s homepage for more stories.
Erdal Arikan, a Turkish professor and scientist, held a low profile until Huawei — China’s leading 5G equipment manufacturer and the world’s second largest seller of smartphones — elevated his work out of obscurity and made it the underlying technology behind 5G.
With Huawei’s backing, Arikan’s so-called polar codes would go on to become the standard for 5G data transmission — propelling Huawei to the forefront of the race for 5G, and China with it. Arikan himself recently told Wired that in his view, China would see a new wave of trillion-dollar companies, built with 5G at the heart, wrestling the mantle of tech leadership away from Silicon Valley.
“5G is totally different than the internet. It’s like a global nervous system,” Arikan said. “Huawei is the leading company in 5G. They will be around in 10, 20, 50 years—you cannot say that about the US tech companies. In the internet era, the US produced a few trillion-dollar companies. Because of 5G, China will have 10 or more. Huawei and China now have the lead.”
Indeed, the long-awaited arrival of high-speed wireless 5G technology has been both heralded and feared: Industry insiders are excited for its capacity to drive new innovation, but it also comes with the anxiety that it’s the beginning of the end for America’s dominance in the global tech market.
Proponents say that with faster speeds and lower latency, 5G will suddenly bring cutting-edge technologies like augmented reality, self-driving cars, the Internet of Things, and even smart cities closer to the mainstream than ever before. That means an opportunity for startups and major companies alike.
At the same time, the demise of telecom hardware manufacturers like Lucent and Nortel put America behind in supplying the equipment carriers need to deploy 5G, giving international firms like Nokia, Ericcson, Samsung, and China’s Huawei and ZTE the opportunity to take over the market.
Yet despite Arikan’s belief that China’s lead in 5G is unassailable, some experts say it’s too soon to plan a funeral for Silicon Valley, as the American tech industry’s proficiency with software presents a tremendous opportunity — with cloud providers like Amazon Web Services, Microsoft, and Google Cloud particularly well-positioned.
“I think the low-hanging fruit here is developing applications that run on 5G,” said Jeff Reed, a founder of Virginia Tech’s wireless research group who has advised the government in the past. He says that the opportunity for tech companies is a kind of “resurgence.”
“I think the money to be made is more in the applications than in the hardware itself. The hardware is going to become a commodity and get really, really cheap,” he said.
China may not be as far ahead as you might think
There’s no denying that China has made great strides in 5G.
“One thing I think an American audience doesn’t necessarily appreciate is the scale of what’s happening in China,” said Elsa Kania, a fellow at the Center for a New American Security who studies emerging technologies and Chinese military innovation. “I see more examples in China than I have come across as an American in terms of 5G becoming more of a reality rather than hype.
China currently has more 5G phones, subscribers, and better 5G coverage than the US, and says it has installed over 700,000 5G base stations, the equipment which transmits 5G signals. The US has 50,000, according to estimates.
“They are selling more systems than anybody, they’re providing more intellectual property for standardization than anybody. They have dominated this process,” Reed said.
But China’s 5G numbers should be taken with a grain of salt, said Doug Brake, director of broadband and spectrum policy at the Information Technology and Innovation Foundation: The US tends to count cell sites whereas China counts base stations in totality, and there are major differences in how China counts its 5G subscribers.
Brake also suggests that while China has moved quickly to implement 5G connectivity across much of the country, it may be slow-and-steady that wins the race for America.
“There are good reasons to believe that our sort of market system and more incremental economical approach will end up with a more robust and higher performing network,” Brake told Insider. Besides, he noted, while companies like Huawei get much of the attention in 5G, American chipmaker Qualcomm made huge contributions to development of the technology.
Kania, too, suggests that much of the conventional wisdom around China’s 5G stance comes from a nationalist marketing push from companies like Huawei itself. Sifting the signal from the noise, however, shows that there’s still lots of opportunity for America to establish a firm footing, especially in software.
“American companies are quite strong there and 5G is not a single thing, nor is it monolithic,” Kania said.
Opportunity for Amazon, Microsoft, and Google
Though it’s still early, analysts predict that as networks become virtual, or software-based, 5G will be the impetus for the next wave of multi-billion dollar infrastructure spending. That will come as carriers fully deploy their networks with edge computing, the industry term for putting data processing power closer to customers’ devices or locations for better performance — thus giving cloud providers with edge capabilities a chance to build momentum.
In 2019, Amazon partnered with Verizon and other major network operators to launch AWS Wavelength, its 5G edge computing service, which enables developers to build applications that work over 5G networks. Microsoft has done the same with Azure, its cloud service. Google Cloud, which partnered with AT&T, has also launched extended edge computing offerings, and Hewlett Packard Enterprise, VMware, and Cisco have likewise rolled out cloud-based tools for wireless carriers.
Virtualization of 5G networks creates another major opportunity: allowing carriers to “slice” their wireless networks into multiple virtual sections from the same physical infrastructure. That’s useful for allowing carriers to dedicate a certain amount of wireless bandwidth to enterprises.
Similarly, analysts say there’s strong demand for companies to deploy their own 5G networks, which provide greater control, security, and capacity, and another chance for carriers, cloud providers, and equipment manufacturers to cash in.
Patrick Filkins, a 5G-focused analyst at IDC, told Insider that tech companies have already started moving towards this opportunity. Microsoft, for example, partnered with Verizon in October to offer solutions for private 5G networks to the manufacturing and healthcare industries, and IBM announced in December it had teamed up with Samsung to bundle edge computing and private 5G networking. Last week, Google Cloud announced a 5G partnership with Nokia, too.
And on another note, recent years have seen the launch of projects like the O-RAN Alliance, sponsored by American companies like Dish Network and AT&T (as well as Chinese firms like ZTE and China Mobile), that aim to consolidate much of the 5G industry on open standards for virtualized networks. Tech giants like Cisco, Facebook, VMware, and Intel have also led their own consortiums or projects aimed at the same purpose.
If and when those projects bear fruit, proponents like Reed suggest that the US and China will be competing on a more even playing field.
Still, Kania is cautious of the “excessive exuberance” around virtualization and open standards. After all, she suggests, as fast as Silicon Valley is moving on 5G, Chinese firms like Huawei aren’t slowing down either, and have a hand in open standards too.
“I’m somewhat skeptical about the idea that openness and virtualization can undermine Huawei when some of the same technologies are being pursued by many Chinese companies, and you do need some of the underlying hardware and fundamental investments to build a 5G infrastructure,” she said. “Based on current trends, China is more poised to reap the benefits of applications of AI, 5G, and otherwise.”
Biden’s tonal shift on China, and a ‘measured approach’ to 5G
National security and economic concerns have been major undercurrents to the debate around 5G. Former Attorney General Bill Barr has warned of the “monumental danger” of China’s 5G dominance. By blacklisting Huawei equipment and persuading allies to do the same, the Trump administration has hurt Huawei’s 5G business, but encouraged its software and cloud services development, analysts say.
Robert Blair, a Trump-appointed advisor on 5G policy in the Department of Commerce, said the Trump administration had planned to work with tech companies like Microsoft, Dell, and Intel, hardware manufacturers like Ericsson and Nokia, and telecom providers to create an “American alternative to un-trusted technology.” Officials had also discussed encouraging Cisco to acquire Ericcson or Nokia, and creating a nationalized 5G network.
Josephine Wolff, a cybersecurity policy professor at Tufts University, told Insider the Trump administration disproportionately focused on action against China, perhaps overlooking the “enormous amounts of reason” to be worried about Russia and Iran, especially in light of the sweeping SolarWinds hack.
Experts are optimistic that the new Biden administration, working with a Democrat-led Congress, could set the stage for greater investment in 5G infrastructure, research, and IT spending. Jessica Rosenworcel, who was named acting Federal Communications Commission chair and is a frontrunner for the permanent role, has voiced her belief that America will fall behind in technological innovation on the global stage without a significant investment in 5G.
For American tech companies, that could mean more opportunities similar to Blair’s “alternative,” or a chance to build out the 5G cloud services and software crucial to its future, especially with national security issues taking center stage.
The Open RAN Policy Coalition — whose members read like a who’s who of American 5G companies, including AWS, Microsoft, Google, Facebook, VMware, Qualcomm, and AT&T — is already trying to make that happen. It launched last May to lobby for government investment in open, cloud-based networks that would presumably benefit American companies.
Wedbush analyst Dan Ives wrote in a note last Sunday that the Biden administration’s change in tone on China could result in “a major bullish sign” for Cisco, Apple, and chipmakers, but the battle over 5G’s foundations would likely remain contentious.
Though Biden’s national security team isn’t yet fully in place, his nominees’ Senate hearings have indicated that while the tone may change, a break from Trump’s China policies is unlikely. Antony Blinken, Biden’s pick for secretary of state, called China “the most significant challenge of any nation state,” and Avril Haines, the new director of national intelligence, said she supported a more “aggressive stance” on China than Obama’s.
Kania, who has served as policy advisor to the Biden campaign, said the Biden administration has also indicated technology and innovation are core elements of their agenda, and called it “encouraging and vitally necessary.”
“Having 5G be in the spotlight will not be new or unique to the Biden administration, but hopefully there are reasons to expect a course correction and recalibration of policies towards a more measured approach,” she said.