Home > News > Industry news

COVID-19 will help China to extend its 5G lead

2020-03-14 14:15:37

 

In its nastiest form, COVID-19 obstructs the airways and causes breathing problems for the infected. It could also lead to a blockage for the companies that make network equipment.

 

Despite a surge in network traffic, and a global recognition of broadband's overnight importance, service providers have begun warning investors of the pandemic's financial impact. As capital expenditure is cut, 5G looks especially vulnerable. And Europe and the US are in much worse shape than China.

 

Indeed, Huawei now expects China to extend its 5G lead over Europe as a result of COVID-19. "5G deployment in Europe will certainly be delayed to when the pandemic is brought under control," said Eric Xu, one of the Chinese vendor's rotating CEOs, during a results presentation this week. "After the pandemic was brought under control, China has accelerated its 5G deployments."

 

The rationale makes sense. While China is now easing the restrictions that have closed factories and kept workers off the streets, most of Europe remains under lockdown. Notwithstanding the government response in some countries, unemployment is rising, and incomes are being squeezed. Even if telecom is more important than ever, some households will ditch non-essential services and downgrade to cheaper tariffs. Only the insane would pay for a TV sports package when athletes are languishing at home playing Fortnite. Even in Sweden, which has controversially avoided a total lockdown, telecom incumbent Telia has now cut dividends as it prepares for a hit.

 

Last year, 5G seemed a priority for most operators in developed markets. This year, it will be much further down the to-do list. In the absence of any new 5G applications, one of the main reasons for investing in the technology is to ease the pressure on congested 4G networks. But just like the roads, those networks have featured less traffic since the virus took hold. On March 20, the UK's BT reported a 5% drop in mobile data traffic, compared with normal levels. People confined to their homes need broadband and Wi-Fi, not 4G and 5G.

 

This forced slowdown is bad for Huawei and the operators building 5G networks, but it will be especially bad for Huawei's Western rivals. Unlike Huawei, Ericsson and Nokia cannot count for a substantial boost on a recovering China, which has long rigged its equipment market in favor of domestic suppliers. When China Mobile this week handed out 5G contracts worth $5.2 billion, about 90% of the work went to Huawei and ZTE. Nokia came away empty handed.

 

As a mobile-only vendor, Ericsson looks the most exposed to a 5G slowdown, and more than 50% of its business is generated in Europe and the Americas, where the rate of COVID-19 infections is rising. Huawei's logic implies the US will also face a delay in 5G rollout: It has overtaken Italy as the country with the highest number of infections, and its response to the outbreak has been cack-handed and incoherent, with some states under lockdown while others continue as if the virus were fake news. Although less reliant on the 5G radio business than Ericsson, Nokia could also be in trouble: About 30% of its sales came from North America last year, and another 28% from Europe.

 



    
 
Recommended information
CommunicAsia 2024
CommunicAsia 2024
OFC 2024: Optical Fiber Communications Conference and Exhibition
OFC 2024: Optical Fi
YOFC Hosts ICT Summit for Chinese Enterprises in Peru
YOFC Hosts ICT Summi
Following the Paths of Light for Over Five Decades | FiberHome Releases the New Smart Optical Network LIGHTS UP Solution
Following the Paths