Despite being the next-generation cellular communication technology, 5G has become a crucial topic in the global political economy sphere. It has become a key agenda in the escalating US-China trade war. There has been a growing belief that the underlying agenda of the U.S. has been to slow down China's growth in the technology and innovation sphere. In the rising trade war, China's iconic success story Huawei has become a centerpiece. Huawei - the world's largest telecom equipment provider and second largest mobile phone manufacturer - has on offer, and ready to deploy 5G cellular technology gears. Upon raising the security issue, the U.S. administration has obstructed Huawei 5G gear deployment in the USA, and its allies have also been encouraged to follow the same policy. Moreover, US technology firms have been barred from exporting components to Huawei. Such development has been escalating US-China trade relations and likely job loss in both the countries. But what are its likely implications for the rest of the world, particularly technology users?
The reshaping the global value chain due to China-US trade war has been creating export opportunities in other countries, particularly in South East Asia. Some advanced countries are also benefiting from such trade war-triggered manufacturing value chain restructuring. Apparently, it's a blessing for the rest of the world. But what are the implications of the measures taken against Huawei's 5G technology? Here are a few areas worth taking note.
ECONOMIC OPPORTUNITY BEING DELAYED: In addition to supporting voice and consumer level Internet connectivity, 5G offers very low latency (close to 1ms), highly reliable and also high capacity connectivity to the time-sensitive Internet of Things (IoT). It has been estimated by GSMA that the global impact of mmWave (24 GHz and 86 GHz) 5G will likely grow from an annual $13.1 billion in 2024 to $565 billion in 2034. Over the 10 years period, spanning from 2024 to 2034, the cumulative economic contribution could be as high $2.2 trillion. With the USA's position about Huawei, it has been estimated that western technology providers will take at least 18 months to mature their offerings for deployment. As a result, the world will suffer a delay in exploiting substantial wealth creation opportunity out of 5G.
COST OF EQUIPMENT: It's being argued that Huawei's technology is highly matured and at par with the rest. Due to the high density of software, 5G technology gears benefit highly from the scale effect. Due to generous access to the large Chinese market, Huawei is in a position to offer 5G gears to the rest of the world at a far lower price than competitors can offer. It has been estimated that operators in Europe will likely be required to pay $60 billion more to equipment markers if they decide not to adopt Huawei's 5G offerings.
ECOSYSTEM DISRUPTIONS: Due to U.S. ban, it has been learned that more than 50 per cent components used in Huawei's 5G gears are already suspended, additional ones are at risk. These components starting from Antennas to Chip design software have high-level intellectual property (IP) content, for which alternate sources could not be found easily. For many of them, it would take years to acquire IP base to create alternatives. Although Huawei is showing mobile operating system as an alternative to Android, but how the company will deal with other components is a serious question to answer. If the U.S. ban on the supply of components from U.S. technology firms continues, Huawei will be required to spend years to acquire the necessary competence to create alternative source. As a result, the 5G ecosystem will likely get disrupted.
ECOSYSTEM FRAGMENTATION: Like previous generations, 5G relies on standardisation supported by patents and licensing agreements. History suggests that companies holding standard essential patents (SEPs) benefit significantly from royalties. Patent data indicate that led by Huawei, China, collectively, owns over one-third of the world's SEPs for 5G. Moreover, Huawei's 5G technology has been developed for mid-band spectrum available for commercial use in many countries. For cost-effective deployment, mid-band solutions could be used to cover the bulk of 5G networks, with high-band technologies to provide complementary coverage in densely populated areas. Although more or less all developing countries and most advanced countries have this mid band available for 5G deployment, the USA already allocated this band for defence purpose. As a result, the USA cannot benefit from this mid band 5G solutions right now. If the spectrum availability divides the 5G ecosystem into two groups, the economies of scale benefit will be lower, leading to the higher cost of deployment.
UNCERTAINTY OF TECHNOLOGY DISCONTINUITY: Due to the scale effect, particularly in software-intensive technologies like 5G (and also for network effect), the market usually tips toward one standard as opposed to multiple standards. For this reason, not only video recording technology Betamax, but also a superior cellular technology like code division multiplexed (CDMA), promoted by a U.S. company, could not coexist with the alternative standard promoted by Europeans. Similarly, WiMAX technology could not coexist with long term evolution (LTE). Such reality raises the uncertainty about the continuity of Huawei's current offering.
The US-China trade dispute leading to suspending supply of components by American technology firms to Huawei and American lobby for not adopting Huawei's 5G networking gears have multidimensional implications. In one hand, it's going to delay the 5G network deployment with alternate options, and on the other, alternative technology solution costs much higher. The more critical aspect is the likely discontinuity. The escalating political economy dimension around 5G affecting the ecosystem poses a risk to the continuity of Huawei's 5G standards.
Most of the developing countries have far less opportunity than their advanced counterparts to benefit from 5G based industrial innovations. Besides, the uncertainty surrounding the 5G standards is yet be resolved to minimise the risk on technology discontinuity. Under the circumstances, it appears that developing countries, including Bangladesh, should slow down their 5G-deployment mission, and carefully keep watching the evolving situation.
M Rokonuzzaman PhD is an academic and researcher on technology, innovation ands policy. firstname.lastname@example.org
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