Is the 5G Roll-Out in China Already Facing A Road Block?

China, alongside America and Europe, has been touted to be one of the biggest markets for 5G. According to a recent IDTechEx research report, 5G Technology, Market and Forecast 2019-2029, there will be over 120 million 5G subscribers in 2022 and 1.5 billion by 2029 in China, about half of the total number globally. However, the report also forecasts a possible slowdown of the Chinese market in coming years.

According to the market research, three main telecom carriers in China (China Mobile, China Telecom and China Unicom) announced their capital expenditure (capex) plan for 2019. The 5G capex is lower than expected. China Telecom is expected to spend 9 billion CNY ($1.34 Billion USD), slightly higher than China Unicom's plan of 6-8 billion ($890 Million USD). Market leader China Mobile did not disclose any number, but it is likely to be around 17 billion CNY ($2.5 Billion USD). In total, the capex for 5G is estimated to be 34 bn CNY ($5 Billion USD) in China in 2019, which is much lower than what was expected (50-100 bn CNY in 2019 and over 250 bn in 2020).

One reason for the slower than expected 5G roll-out is the ongoing 4G network deployment. China Mobile alone has deployed 350K 4G base stations in 2018, more than double of what they planned (140K). On the other hand, the revenue from each subscriber is declining, as the Chinese government urges cellular providers to reduce the price for subscribers to use the cellular network. Facing this financial pressure, Chinese operators hesitate to throw money into the high-cost 5G roll-out without knowing if they will be able to earn money on their investment. The CEO from Huawei, the top one telecom infrastructure supplier and number two smartphone provider in the world, has publicly expressed a similar concern on the payback from 5G.

It is predicted that by 2030 the direct 5G revenue in China will be 6.3 trillion CNY (about $930 Billion USD) and the Compound Annual Growth Rate (CAGR) in the coming ten years will be 29 percent. 5G will create 8 million jobs and contribute around 5.8 percent GDP growth in China by 2030. The indirect revenue generated by 5G will be 10.6 trillion CNY (about $1,579 Billion USD), with a CAGR of 24 percent. Among them, the direct revenue for telecoms will be over $200 Billion USD by 2029.

As the current 5G deployment plan is slower than expected, these numbers might be overestimated. The new IDTechEx Research report forecasts a moderated revenue of $160 Billion USD for telecoms in China by 2029. Nonetheless, China is still the main market to watch. It is likely that the telecoms in China will at least invest $200-350 Billion USD from 2020-2030 for 5G development, with the key focus on automotive, industry, healthcare and energy.

Click here to view the full report, 5G Technology, Market and Forecast 2019-2029.

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