China: 5G industry chain status and prospects in 2020
China has built more than 130,000 5G base stations by the end of 2019. It is expected that China will build more than 600,000-800,000 5G macro base stations in 2020.
By the end of 2019, my country had built more than 130,000 5G base stations. In the early stage of 5G commercial use, operators started large-scale construction of 5G networks.
It is estimated that in 2020, telecom operators will invest more than 220 billion yuan in 5G network equipment. Various industries have spent more than 54 billion yuan on all aspects of 5G equipment, and vertical industries in the middle and late stages of 5G commercial use will become the main force for network equipment spending.
Definition of 5G
5G narrowly refers to the wireless access network technology of the fifth generation mobile communication technology; broadly speaking, it refers to the fifth generation mobile communication technology, including the complete technical system of the wireless access network, core network and related supporting systems.
5G industry chain
The 5G industry chain is very broad, including components, main equipment, operators and downstream applications.
The initial investment mainly includes wireless equipment, transmission equipment, base station equipment, small base stations, optical communication equipment, and network planning and implementation.
From the perspective of application, 5G applications include three major directions: industrial digitization, smart life, and digital governance.
5G universal applications (that is, applications that may be used in various 5G scenarios in various industries in the future) include 4K/8K ultra-high-definition video, VR/AR, drone/vehicle/ship, and robot.
The application of 5G to industrial, medical, education, security and other fields will also produce X-type innovative industry applications.
The upstream and midstream of the 5G industry chain will benefit
At present, China’s 5G network construction is in the world’s first camp. According to the construction cycle, the radio frequency, antenna, PCB and other components in the upstream of the industry, as well as the main equipment, system integration and service industries such as wireless base stations and optical communication equipment in the midstream will benefit first.
The “New Infrastructure Development White Paper” released by the a research institute of the Ministry of Industry and Information Technology shows that the construction of new infrastructure in the 5G field will include the following:
- Upgrade, transformation and storage of facility rooms, power supply, towers, pipelines, etc.
- R&D and deployment of basic network equipment such as 5G base stations, core networks, and transmission.
- Deployment of 5G new cloud-based business application platform, collaboration with new services and various vertical industry applications.
- Establishment of the new advanced manufacturing network environment around the 5G industrial Internet. New infrastructure such as the Internet of Things cloud, network, and terminals, and the infrastructure connecting cars, roads, and internet around the Internet of Vehicles.
Judging from the proportion of each sub-industry invested in 5G communications, communications equipment is the largest segment, accounting for about 40% of the total investment.
Communication network equipment is the core of the mobile communication system, involving wireless equipment, transmission equipment, core network and business bearer support system equipment. The main equipment supplier plays a unified position similar to the general contractor in the entire network construction, and provides the operator with a complete solution.
Market segments of China’s 5G industry chain
2020 is a key year for 5G industry chain-related companies to realize their performance from 5G infrastructure construction.
The key reasons are reflected in two aspects. First, 2020 is the year with the largest increment in some areas of the industrial chain; second, after 2020, the growth rate of some markets has slowed down significantly. Over time, the number of players entering the market has gradually increased and competition has intensified.
1) Communication network equipment
Market research firm Dell’Oro Group released a report showing that the top five global telecommunications equipment suppliers in 2019 are Huawei (28%), Nokia (16%), Ericsson (14%), and ZTE (10%) and Cisco (7%).
The five telecom providers accounted for 28%, 17%, 14%, 8% and 8% of the revenue market in 2018, respectively. Huawei and ZTE’s revenue share increased from the previous year, while Nokia and Cisco’s revenue share fell slightly by 1%.
Dell’Oro Group pointed out that the US government’s restrictions on Huawei’s actions have brought mixed results in 2019. Huawei’s overall telecommunications equipment share continued to increase, but the market share growth rate in 2019 is lower than 2014-2019 The annual average occupancy growth.
In addition, ZTE’s revenue share in 2019 increased by about 2%, reflecting the strong recovery since the US ban in the first half of 2018.
2) System integration and services
As an emerging service, system integration is an industry with the strongest development momentum in the international information service industry in recent years.
System integration is an optimized integrated design. A large-scale integrated computer network system includes computer software, hardware, operating system technology, database technology, network communication technology, etc.
3) Base station RF
The radio frequency front end (RFFE) is the core component of the mobile communication system and plays
the role of sending and receiving radio frequency signals.
It includes five components: power amplifier (PA), duplexer (Duplexer and Diplexer), radio frequency switch (Switch), filter (Filter), and low noise amplifier (LNA).
From the perspective of the revenue of the five major devices, filters account for about 50% of the revenue of RF devices, RF PA accounts for about 30%, RF switches and LNA account for about 10%, and others account for about 10%.
It can be seen that filters and PA are the top priorities of RF devices. For communication equipment, without PA, signal coverage will be a problem, and the absence of filters means that the equipment loses its ability to resist interference.
The RF front-end market is highly concentrated, with the four giants Skyworks, Corvo, Broadcom and Murata occupying more than 85% of the global market share.
Domestic manufacturers accelerate to catch up. The leading international RF front-end enterprises that basically cover all fields mainly adopt the DM model, and domestic manufacturers quickly enter various fields through the Fabless model.
4) Network planning and maintenance
When planning a 5G wireless network, enterprises should pay attention to satisfy the requirements of network coverage and network quality while ensuring a reasonable wireless network structure. Only by doing a good 5G network planning can the network achieve the expected application effect.
At present, the major domestic network planning and design enterprises include Eastone Century Technology, Guomai Technologies, Fuchun Technology, Guangzhou GCI Science & Technology, and Jilin JLU Communication.
Network planning operation and maintenance includes early-stage planning and design of wireless access networks and service bearer networks, and later optimized operation and maintenance. In this part, it mainly includes China Communications Services, Guangzhou GCI Science & Technology, Sunsea AIoT Technology, Sunwave Communications, Fuchun Technology, Hangzhou Huaxing Chuangye Communication Technology, Zhong Fu Tong Group, etc.
5) Base station antenna
In the early days of network construction, China’s base station antennas were monopolized by foreign companies, but now they are basically domestically produced. At present, the base station antenna industry is facing excessive competition.
The base station antenna industry is fiercely competitive, but there are few manufacturers with certain R&D strength, large production capacity, and international competitiveness. Domestic manufacturers mainly include a few companies such as Comba Telecom, Tongyu Communication, and MOBI Development.
According to a report released by EJL Wireless Research in 2019, the top companies in China’s base station antenna market share in 2018 were Comba Telecom (21%), Tongyu Communication (8%), and Motorola. MOBI Development (7%), Shenglu Telecommunications (3%), etc.
Since 2011, Comba Telecom has been rated as the world’s first-class base station antenna supplier for eight consecutive years by industry analysis agency EJL Wireless Research. Since 2009, the base station antenna shipments of Comba Telecom (Comba Telecom) It has firmly ranked among the top three in the world.
6) Optical module
The overall strength of Chinese optical chip companies is weak, while high-end chips rely on imports. The current situation that domestic chips are difficult to meet demand will continue.
The existing domestic optical device products are mainly concentrated in the low-end field, and serious product homogeneity (serious product homogeneity). The core production technology of high-end optical chips is controlled by foreign chip manufacturers. China mainly depends on imports from countries such as the United States and Japan.
According to data, foreign manufacturers account for about 90% of the market share in the field of high-end optical chips. Domestic chip manufacturers can only choose to improve their research and development capabilities by acquiring overseas high-end optical chip manufacturers.
In recent years, equipment manufacturers such as Huawei, ZTE, and Fiberhome Telecommunication Technologies have gradually begun to make progress in the upstream chip field and started an integrated strategic layout, urgently improving the current pattern of optical chips.
China’s Accelink Technologies has ranked among the top ten optical device manufacturers in the world, with a global market share of about 6%, but the core technology of optical devices-chip technology is still in the hands of overseas manufacturers.
7) Fiber optic cable
China’s optical fiber cable industry has made major breakthroughs in optical fiber preform technology from the beginning of the production of optical cables to the production of optical fibers. Most of the optical fiber cable companies have integrated rod production capacity.
At present, in the Chinese fiber optic cable market, Wuhan Yangtze Optical Fiber and Cable (YOFC), HTGD, Fiberhome, ZTT Cable, Futong Group. These five Manufacturers accounted for most of the market share, and each company’s market share accounted for more than 10%.
Among them, YOFC accounted for 23% of the national market, and HTGD accounted for 20%, clearly leading the other three companies.
China’s 5G base station construction status and planning
The 5G base station is the core equipment of the 5G network, providing wireless coverage and realizing wireless signal transmission between the wired communication network and the wireless terminal.
In technical standards, a 5G frequency band is higher than that of 2G, 3G, and 4G networks. Therefore, according to the positive correlation between frequency and attenuation during signal propagation, the base station density of 5G networks will be higher.
From 2020 to 2022, 5G investment will gradually increase. By 2025, a 5G network that will basically cover the whole country will be built. It is expected that 5G base stations will be 5 million to 5.5 million. Based on an average of 500,000 yuan per base station, direct investment in base stations will be about 25 Trillion yuan.
According to data from
the Ministry of Industry and Information Technology, China has built more than 130,000 5G base stations by the end of 2019. It is expected that China will build more than 600,000-800,000 5G macro base stations in 2020.
China 5G Industry Investment Forecast
From the perspective of industrial structure, the driving force for growth has shifted with the deepening of the 5G commercial process:
1) In the initial stage of 5G commercial use, operators have carried out large-scale network construction, and the income of equipment manufacturers brought by 5G network equipment investment will become the main source of 5G direct economic output. It is expected that by 2020, the total revenue of network equipment and terminal equipment will be 450 billion yuan, accounting for about 94% of total direct economic output.
2) In the mid-term of 5G commercialization, terminal equipment expenditures and telecommunications service expenditures from users and other industries continue to grow. It is expected that by 2025, equipment manufacturers will generate revenue of 1.8 trillion yuan, of which users and other industries will spend 1.4 trillion yuan on terminal equipment. The total revenue of operators is 0.7 trillion yuan, and the total of the two accounts for 64% of total direct economic output.
3) In the middle and late stages of 5G commercialization, Internet companies’ income from 5G-related information services has grown significantly, becoming the main source of direct output. It is expected that by 2030, Internet information service revenue will reach 2.6 trillion yuan, accounting for 42% of total direct economic output.
From the perspective of equipment, various vertical industries in the mid-to-late period of 5G commercial use will become the main force for network equipment spending:
In the early stage of 5G commercial use, operators started large-scale construction of 5G networks. It is estimated that in 2020, telecom operators will invest more than 220 billion yuan in 5G network equipment, and various industries will spend more than 54 billion yuan on 5G equipment.
With the continuous improvement of network deployment, the network equipment expenditure of operators is expected to start to decline from 2024.
With the penetration and integration of 5G into vertical industries, the expenditures of various industries on 5G equipment will grow steadily, becoming the main force driving the growth of the income of related equipment manufacturing companies.
In 2030, it is estimated that all industries and fields will spend more than 520 billion yuan on 5G equipment, accounting for nearly 69% of the total revenue of equipment manufacturing companies.
Challenges facing China’s 5G infrastructure
As the first choice for new infrastructure, 5G has been given the expectation that it will bring economic downward pressure in response to the epidemic and provide a new engine for high-quality and sustainable economic development.
Wu Hequan, an academician of the Chinese Academy of Engineering, pointed out that the time interval between 5G standard release and large-scale network construction is shorter than previous generations of mobile communications, and technology, operation and maintenance, products, and markets are all facing maturity pressure.
5G also brings new security challenges. The new infrastructure is not only a construction project for China’s 5G, but also a continuation of technological innovation. This is a real test of China’s 5G leadership.