According to foreign media reports, one of the main reasons for the Sino-US trade war is to compete for 5G dominance. As 5G is regarded as the technological pillar from driverless cars to future smart cities, both China and the United States are striving to become 5G leaders, hoping that they can define this new generation of mobile Internet standards.

As trade tensions between China and the United States escalated on Friday, products ranging from soybeans to automobiles may be affected, but 5G, a key technology, may actually be one of the reasons for the beginning of a trade war between the world’s largest economies. One.

5G technology is the next generation of mobile Internet. It allows people to download movies in a few seconds, which can bring a good mobile Internet experience. However, 5G is much more than high-speed mobile Internet. In the eyes of the industry, 5G is an advanced technology that can support next-generation infrastructure. It will provide technical support for billions of Internet devices, smart cities, and driverless cars that will be launched in the next few years.

5G technology may be the key to U.S. President Donald Trump's promise to "make America great again," and it is also the key to China's ambition to become a world leader in artificial intelligence by 2030.

An important reason for the trade war, China and the United States strive to become the leader of 5G

Stakes

Mobile Internet needs to reach a globally agreed "standard" so that companies and mobile operators that manufacture telecommunications equipment can promote the technology globally. The 5G technical specifications were agreed in December last year.

But as Chinese telecommunications equipment companies such as ZTE and Huawei, and European companies such as Nokia and Ericsson invest more manpower and material resources in the 5G field, real competition is unfolding. American chip manufacturers and operators such as Qualcomm and Intel also participated. Communications company Rivada Networks CEO Declan Ganley (Declan Ganley) said that this is also part of the trade war.

Earlier last week, Gan Li said in an interview with CNBC: “The key to the problem is who defines and controls the 5G model, architecture and agenda. The importance of this is that 5G is a deep blue ocean in the network field.”

"So this is an important strategy game. It is more important than airlines. Controlling 5G technology means controlling one's own airspace. It is one of the most important areas and is related to the ultimate development goal."

At stake is the economic value of trillions of dollars. According to data from IHS Markit, it is estimated that by 2035, the global economic output of 5G will reach 12.3 trillion US dollars.

The US needs to "turn over the table"

For Gan Li, the current model on how to allocate radio frequency bands to mobile operators has been broken. Currently, US telecommunications companies bid for the so-called radio spectrum through an auction process organized by the Federal Communications Commission (FCC). In other countries, appropriate regulatory agencies also control spectrum auctions. This usually leads to big players with more capital dominating the market.

The CEO said that this has stifled innovation, especially those European companies that led previous generations of mobile technology.

"Because of the way the radio spectrum is allocated, we have rebuilt a top-down model, which has now become an absolutely critical part of our economy," Ganli said.

He added that in the auction model, American companies compete with each other in order to win customers, which affects their profits and, in turn, their ability to invest in innovation. However, in China, only two or three major state-owned network operators dominate the market. With the support of the Chinese government, they can continue to carry out large sums of operations and investment, which is conducive to the improvement of innovation capabilities, which puts them ahead of US telecommunications companies, which may be difficult to compete with when launching 5G.

Gan Li said that although many European and American telecommunications companies may die, China can support its domestic enterprises. This is why he and his company Rivada Networks advocate a wholesale model of allocating spectrum, similar to how the electricity market works.

In theory, this model allows more participants to bid for spectrum when demand is met, which will lead to more dynamic pricing of radio spectrum.

"What we need to do is to completely overturn the existing model," Ganli said, adding that this will put the United States ahead of China in 5G.

Interestingly, the Trump administration hinted at this policy. Kelsey Guyselman, policy adviser to the White House Office of Science and Technology Policy, said at a recent event that the government recognizes that "shared" spectrum may be a way to launch next-generation mobile networks, implying a wholesale model.

Obviously, the top executives of the Trump administration are considering the 5G wholesale market model. Brad Parscale, Trump's 2020 campaign manager, said on Twitter last month that he thinks this is the way forward.

Gan Li said that 5G competition is rapidly intensifying, and the United States needs to quickly introduce a wholesale model, otherwise it may lose to China.

"We are still 13 months away from a real failure," Gan Li told CNBC.

However, not all experts believe that the wholesale spectrum model can achieve the desired effect in the United States.

"I think that although this is a good idea, whether the jury will achieve the stated goals is still open to question. And the reason why many of the major companies participate in the 5G competition is to look for truly profitable 5G business cases in the future." , Shaun Collins (Shaun Collins), CEO of CCS Insight, a media and telecommunications analysis company, told CNBC by phone earlier this week.

What is China doing?

Even the closest ally of the United States has realized the threat posed by China in the field of technology. British Foreign Minister Boris Johnson said at a recent event that Chinese technology companies may surpass the United States.

"The Chinese are about to win. They have already obtained 5G. They have found a way out. Everyone will play with their own small devices through the Chinese system instead of the American system," Johnson said.

Although the United States has been fighting back against China, China, the world's second largest economy, has always hoped to deploy more services in 5G. Huawei has been lobbying Australian politicians. The British "Financial Times" revealed that the Chinese giant is the largest corporate sponsor of the Australian legislature. On Thursday, the Portuguese branch of the telecommunications company AlTIce cooperated with Huawei to launch a 5G network.

In addition, market research company Mobile Experts LLC CEO Joe Madden (Joe Madden) pointed out that China is preparing to increase 5G deployment. Madden wrote in the industry publication Fierce Wireless that Chinese Internet companies have begun to increase orders for key components.

“In particular, we have learned from at least 10 different suppliers that China’s 5G deployment is now expected to start in early 2019, rather than in July 2019 as originally planned. In addition, by the end of 2019, these numbers may change. Become huge. The number of 5G base stations deployed in December is enough to cover an area the size of Germany," Madden said.

According to data from the United Nations World Intellectual Property Organization (WIPO), the number of patent applications by Chinese companies increased by 13.4% year-on-year, while the number of patent applications by US companies increased by only 0.1%. Huawei and ZTE are the world's two largest patent applicants, which also highlights that Chinese technology giants are building a huge intellectual property library.

Who will have the last laugh

In this context, it is not surprising that some large Chinese mobile and telecommunications companies have been suppressed by the United States. Earlier this year, the head of the US intelligence agency warned Americans not to buy smartphones made by Huawei. ZTE is prohibited from using components produced by American companies. On Monday, the US government blocked China Mobile from providing services to the US market, citing national security issues.

Telecommunications and 5G are seen as important national security priorities for the White House.

Who wins and who loses? In this case, this is a trillion-dollar problem. China has been strengthening its 5G deployment. The Trump administration said that China is promoting fairer economic treatment, which can also be seen as gaining more advantages in the telecommunications industry to gain more space and time. After all, 5G is obviously more important than previous network technologies.

But will there be a winner in the telecommunications competition? Europe, the United States and China have all successfully coexisted in 4G, and for some people, the concept of winning in 5G may not be so clear.

"This is a competition we are watching closely. I really don't know who will win." Collins pointed out.

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