5G era: New infrastructure, China and the United States battle for new generation of information technology

Introduction

In his important speech at the 2018 General Assembly of Academicians of the Chinese Academy of Sciences and the Chinese Academy of Engineering, General Secretary Xi Jinping pointed out: "The world is entering a period of economic development dominated by the information industry. We must seize the opportunity of the integrated development of digitalization, networking, and intelligence, and use informatization and intelligence as leverage to cultivate new momentum."

Communications infrastructure is the "highway" of the information Internet era, providing the underlying infrastructure support for the digital economy and a battleground for countries around the world to develop high technology and ensure strategic security. 1G to 4G was once dominated by Europe and the United States. In 2010, the United States took the lead in launching 4G commercial use, which subsequently led to the rapid development of a number of mobile Internet applications. 4G's leading position has cumulatively driven $1 trillion in output for the United States and contributed $475 billion to the growth of the U.S. GDP each year, making a huge contribution to the United States' consolidation of its technological dominance. In the future, 5G will drive a trillion-level downstream economic value with trillion-level investments, becoming the key to competition among major powers. China and the United States will fight for the top spot in the new generation of information technology.

China's mobile communications industry has experienced a development process of 1G blank, 2G backward, 3G follower, and 4G synchronization. Today, we are finally at the forefront of the 5G era and have a say in standard setting, industrial chain supporting, etc. Historical experience shows that infrastructure construction must be forward-looking to transform first-mover advantages into industrial ecological advantages and firmly grasp the commanding heights of the new round of global scientific and technological competition. We suggest that we should promote the construction of new infrastructure represented by 5G, deepen the integration of industry, academia, and research, and promote the integrated development of 5G with vertical industry applications such as industrial Internet, Internet of Vehicles, and artificial intelligence, and accelerate the formation of a 5G innovation ecosystem.

Table of contents

1 Towards the 5G Era

1.1 The fifth generation of mobile communication technology is referred to as 5G, which has three major application scenarios

1.2 Mobile communications have evolved from 1G to 4G and are now moving towards 5G

2 5G is a battleground for countries to develop high technology and ensure strategic security

2.1 5G will drive tens of trillions of downstream economic value with trillions of dollars of investment

2.2 5G industry security is of great significance to national security

3 5G competition: China and the United States are in the first echelon, followed by Japan, South Korea and Europe

3.1 Strategic competition: China incorporates 5G leadership into its national strategy, and the United States continues to exert pressure to curb China's rise

3.2 Deployment competition: China has abundant Sub-6 frequency bands and leads the way in 5G deployment

3.3 Standards Competition: China leads in the number of SEPs, and Huawei's Polar Code achieves breakthroughs in key areas

3.4 Equipment Competition: Four Chinese and European Enterprises Compete for Hegemony, Huawei and ZTE Emerge as New Forces

4 Outlook and suggestions: New infrastructure to seize the commanding heights of the world's new generation of information technology

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1Moving towards the 5G era

1.1 The fifth generation of mobile communications is referred to as 5G, and has three major application scenarios

5G is the abbreviation of the fifth generation of mobile communication technology. Compared with 4G, 5G has obvious advantages in user experience rate, number of connected devices and latency. In terms of rate, the peak rate of 5G base stations and user experience rate reach 20Gbps and 100Mbps, which are 20 times and 10 times that of 4G respectively; the number of connected devices can reach 1 million terminals/km², which is 10 times that of 4G; and the network latency can be reduced from 10ms in the 4G era to 1ms.

According to the ITU's vision, 5G will mainly face three major application scenarios: enhanced mobile broadband (eMBB), massive machine type communications (mMTC), and ultra-reliable and low latency communication (uRLLC). The eMBB scenario requires large bandwidth, corresponding to the ultimate communication experience between people, and corresponds to large-volume mobile broadband services such as 3D/ultra-high-definition video; mMTC and uRLLC are application scenarios of the Internet of Things. mMTC requires wide connection to meet the communication needs between things, and is aimed at application scenarios such as smart cities, environmental monitoring, smart agriculture, and forest fire prevention that target sensing and data collection; uRLLC has extremely high index requirements for latency and reliability, and is aimed at special application needs of vertical industries such as Internet of Vehicles and industrial control. my country has also defined four major application scenarios for 5G technology: continuous wide-area coverage, hotspot high capacity, low-power large connection, and low-latency high reliability, mainly further dividing mobile broadband into continuous wide-area coverage and hotspot high capacity.

1.2 Mobile communications have evolved from 1G to 4G and are now moving towards 5G

Mobile communication technology is updated every ten years, and has evolved from 1G to 4G. The first generation of wireless communication technology was developed in the 1950s and 1960s, launched in the 1970s, and officially put into use in the 1980s. According to industry rules, mobile communication technology undergoes a generational change every ten years. After decades of development, it has evolved from 1G to 4G, and is moving towards 5G at the beginning of 2020.

The transmission efficiency of 1G-4G is constantly improving, and the application scenarios are constantly expanding. The 1G network is an analog signal, which only has voice communication capabilities and a transmission speed of only 2.4kbps; the 2G network was developed in the 1990s, and the analog signal of the 1G era was converted into a digital signal, supporting text and voice communication, and the transmission speed was increased to 64Kbps; 3G is regarded as an important key to the new era of mobile communications. The 3G network has high bandwidth and stable transmission and realizes Internet access. Video calls and large data transmission have become more common, and mobile communications have a wider range of applications. Tablets that support mobile networks also appeared in this era; in the 4G era, the network application is all IP networking, and the transmission speed is 10 times that of 3G, which realizes the popularization of wireless terminal devices such as smart phones and tablets, and breeds a variety of broad application scenarios such as live broadcasting, mobile shopping, and mobile social networking.

5G networks have three major characteristics: low latency, wide connection, and large bandwidth. In the future, they will promote the continuous maturity of application scenarios such as the Internet of Things, Internet of Vehicles, VR, AR, and promote social progress and changes in human lifestyles.

2 5G is a battleground for countries to develop high technology and ensure strategic security

2.1 5G will drive tens of trillions of downstream economic value with trillions of dollars of investment

5G's contribution to the economy can be divided into two aspects: direct and indirect. 5G's direct contribution is to drive the rapid growth of telecom operators, related equipment companies and information service businesses. In the early stage of 5G commercialization, telecom operators first invested in network infrastructure such as 5G base stations, driving investment in 5G equipment; in the middle and late stages of 5G commercialization, a large amount of social capital poured in, and related Internet companies were established to provide 5G-related information services, bringing in a lot of revenue. The maturity of 5G will activate existing industries and create new scenarios and demands, indirectly stimulating economic growth. 5G technology can first meet the eMBB standard, promote the maturity of home entertainment needs such as AR/VR, and drive the explosion of terminal equipment and content. With the gradual improvement of network construction, after reaching the standards of high reliability, low latency and large bandwidth, a wide range of scenarios such as Industry 4.0, Internet of Vehicles, smart cities, and smart medical care will also be gradually stimulated.

Referring to the history of 4G development, the United States' leading position in the 4G era has brought it huge economic contributions and employment opportunities. In December 2010, the United States' largest mobile operator Verizon Wireless began large-scale commercial use of FDD LTE, marking the United States' dominance in 4G technology. The wireless communications industry has a multiplier effect. Every $1 invested can drive $3.2 in GDP growth, and every additional job can drive 7.7 related jobs. According to CTIA statistics, since 2010, the wireless communications industry has created a total of 4.7 million related jobs, driven a total output of $1 trillion, and contributed $475 billion to the US GDP growth each year.

China has the largest wireless communications market. Taking the initiative in the 5G era can bring huge economic benefits and is also the key to determining China's competitive position in the global new generation of information technology. According to statistics from the China Academy of Information and Communications Technology, in 2030, the total output and economic added value directly contributed by 5G will be 6.3 trillion yuan and 2.9 trillion yuan respectively; the total output and economic added value indirectly contributed will be 10.6 trillion yuan and 3.6 trillion yuan respectively.

2.2 5G industry security is of great significance to national security

5G technology is widely used in various fields such as national economy and military, and 5G security is of great significance to national security. As a strategic industry, the telecommunications industry is of great significance to national strategic security. As 5G technology continues to mature and is gradually applied in various fields, mobile communication networks, social relationship networks, and national governance are highly integrated, and the security of the 5G industry is becoming increasingly closely linked to the overall national security.

5G industry security is reflected in multiple areas such as 5G industry chain security, information security, and network security:

1) The security of the 5G industry chain can be specifically divided into technical security, equipment security and terminal security. During the development of 5G, my country's communications industry has encountered all-round suppression by relevant countries led by the United States on the issue of 5G security. In April 2018, the United States banned ZTE from purchasing sensitive products from American companies, and ZTE's business was once suspended. Subsequently, the United States repeatedly suppressed Huawei and banned its 5G equipment. Only when China gains advantages in 5G technology accumulation, equipment manufacturing, terminal operating systems, technical standards, etc., can it ensure the security of the 5G industry chain under heavy pressure and win an environment for the normal and stable development of the 5G industry.

2) 5G information security faces greater challenges in the era of the Internet of Everything. In the future, as the Internet of Things technology matures and is applied further, the interpersonal Internet and the Internet of Things will develop in parallel and be highly integrated. In the future, the number of terminal connections per square kilometer will reach millions, and the massive amount of information generated by social networks, driverless cars, and telemedicine will bring unprecedented challenges to 5G information security.

3) 5G network security is of great significance to national security and economic and social stability. The application of new technologies such as network function virtualization and network slicing will make 5G networks more vulnerable to attacks. In the future, 5G will be widely used in key industries such as industrial manufacturing, the Internet of Things, and the Internet of Vehicles. Once a network attack occurs, economic and social stability and people's production and life will suffer serious losses.

In the future game between major powers, 5G technological leadership will determine how fast a country can move, while 5G security defense capabilities will determine how far the country can go.

3 5G competition: China and the United States are in the first echelon, followed by Japan, South Korea and Europe

According to the comparison of spectrum availability, 5G deployment progress, government policy support and financial support, industry and enterprise investment, market space and other factors, China and the United States are in a leading position. China is well prepared in all aspects. The United States lags behind in spectrum resource availability due to the lack of abundant Sub-6 frequency bands. South Korea attaches great importance to 5G and is relatively advanced in 5G R&D investment, technology reserves and commercial deployment. However, due to its own population restrictions, South Korea's 5G market space is small and insufficient to cultivate a wide range of 5G application scenarios. Japan lags behind China, the United States and South Korea in standard contribution, enterprise and commercial progress. 5G research focuses on application research mainly based on eMBB. The goal of the EU is not to win the 5G competition, but to strive to maintain competitiveness. Within the EU, 5G strategies are mainly based on the national level, and the EU can only play a coordinating role. The 5G construction of each member state is uneven and the overall progress is slow.

3.1 Strategic competition: China incorporates 5G leadership into its national strategy, and the United States continues to exert pressure to curb China's rise

3.1.1 China: Government-led, enterprise-led, R&D, network construction, and industrialization are all promoted

my country's 5G layout is led by the government to actively promote industrial development. The Chinese government attaches great importance to the development of 5G, and has put forward the development goal of "5G leadership" to incorporate 5G into the national strategy. It has made clear arrangements for the development of 5G in the "13th Five-Year Plan" and "National Information Development Strategy Outline" and other plans, requiring China to become one of the leading countries in technology, standards, industry, services and applications in 5G, and to rank among the top in the world in terms of comprehensive competitiveness and innovation capabilities. To achieve this goal, with the support of the national level, China has made efforts in formulating standards, research and development, network infrastructure technology, establishing industrial chains, and participating in key application scenarios.

The Chinese government is actively expanding the influence of standard setting. In 2013, my country's Ministry of Industry and Information Technology, the National Development and Reform Commission and the Ministry of Science and Technology jointly established the IMT-2020 (5G) organization to actively promote the formulation of standards. Subsequently, domestic and international mobile communication operators and equipment were included in the organization. At present, my country's standard essential patents for 5G have reached the world's first level. In terms of research and development, the government actively promotes the integration of 5G industry, academia and research. Under the framework of the promotion group, the government planned and guided the completion of the world's first 5G test project, and completed the third phase of 5G technology research and development testing ahead of schedule at the end of 2018. In terms of network infrastructure construction, China advocates new infrastructure and uses fiscal policies to vigorously support it. At the beginning of December 2019, the number of 5G base stations in China had reached 126,000. The Ministry of Industry and Information Technology stated that it would strive to achieve 5G network coverage in all prefecture-level cities across the country by the end of 2020. In terms of industrialization, the government actively promotes the commercial use of 5G on the one hand, and cultivates a mature ecological environment on the other to promote the development of downstream applications. In June 2019, my country's Ministry of Industry and Information Technology officially issued 5G commercial licenses to the three major operators and China Broadcasting Corporation. In October, the three major operators launched 5G packages one after another, and my country officially entered the first year of 5G commercialization. Active government support and industrial capital investment have helped China form a self-sufficient 5G environment. my country is committed to building a rich ecosystem consisting of equipment manufacturers, chip suppliers, telecom operators, applications and platform providers. As demand for 5G services increases, new companies such as application developers and equipment sales will flourish. This will bring new revenue to telecom and hardware manufacturers, and benefit Internet companies and application developers for a longer period of time.

3.1.2 United States: Government-driven, private sector-led, updating outdated regulations to promote 5G investment

The development of 5G in the United States mainly relies on the investment, research and development, and promotion of private enterprises. While rapidly promoting 5G construction, it also pays attention to network security and strives to gain dominance in the 5G network competition. In September 2018, the Federal Communications Commission (FCC) of the United States released the "5G Acceleration Plan", which is a comprehensive 5G development strategy, including three important contents: 1) Take measures to provide more spectrum for 5G services, put nearly 5000MHz of 5G high-frequency spectrum into the market, and make targeted changes for 5G in medium and low frequency bands and unlicensed bands; 2) Accelerate the review of small cell facilities at all levels of government to encourage the private sector to invest in 5G networks; 3) Update 5G-related regulations to encourage investment and innovation, and ensure the integrity and security of the US 5G communication supply chain.

3.1.3 Japan, South Korea and Europe: Governments and enterprises cooperate to jointly promote the development of 5G

South Korea has formulated a clear 5G development plan, with outstanding progress in infrastructure construction and commercialization. In 2014, the Ministry of Science, ICT and Future Planning of South Korea released the "Future Mobile Communications Industry Development Strategy" with the overall 5G development plan as the main content, and decided to invest US$1.5 billion to support 5G development and launch comprehensive 5G commercial services in 2020. In the same year, the South Korean government established a 5G forum composed of representatives and experts from the public and private sectors, telecommunications service providers and manufacturers to promote 5G standardization and globalization. In 2017, South Korea released the 5G spectrum plan, dividing the 5G mid-band and millimeter wave spectrum resources. During the 2018 Winter Games in South Korea, Korea Telecom, together with many domestic and foreign operators and equipment manufacturers, launched 5G services, creating the world's first commercial use of 5G. In February 2019, South Korea announced the "5G Application Strategic Promotion Plan", which is committed to building a basic environment and proposed policies such as early allocation of 5G spectrum resources and tax reduction for new 5G networks. In April of the same year, the three major operators in South Korea officially launched 5G services, becoming the first country in the world to enable civilian 5G networks. South Korea also released its "5G+ Strategy", selecting five core services and ten "5G+ Strategic Industries".

Japan is actively planning 5G and conducting forward-looking application research. In 2014, Japan established the 5G Mobile Forum to promote the research and development of 5G. In 2016, the Ministry of Internal Affairs and Communications of Japan issued the "Radio Policy for Realizing 5G in 2020", proposing three measures: first, hold a 5G Mobile Summit, organize and coordinate the work of various agencies, and promote the development of 5G; second, promote the collaboration between government, industry, academia and research, complete the spectrum allocation and 5G demonstration; third, carry out standard formulation work under the guidance of the International Telecommunication Union and the Third Generation Partnership Program. In 2018, the Ministry of Internal Affairs and Communications proposed to actively promote application research based on eMBB, focusing on new business models for applications such as Internet of Vehicles, telemedicine, smart factories, and emergency rescue, requiring the commercialization of "post-5G" standards around 2025, and announcing a spectrum utilization strategy plan based on 2030. In April 2019, Japan completed the allocation of mid-band spectrum and millimeter waves to four operators.

Europe focuses on the unification of standards within the EU and strives to maintain competitiveness in the 5G competition. The EU's 5G construction strategy has three main points: First, the five Nordic countries act as "pioneers" and lead the EU's 5G development process; second, the UK, France, Germany and other countries regard 5G research and development as a strategic measure to compete for the commanding heights of the future Industry 4.0. Third, focus on 5G network security measures. In order to achieve its strategic goals, the EU has mainly taken the following three major measures: 1) Fully support 5G mobile communication standardization activities. "Standards" are the key to the future market success of 5G. The EU stimulates private capital to invest in 5G standard formulation in the form of direct investment or policy support, and provides support for mutual coordination among various standard formulation organizations; 2) Formulate a unified 5G experimental roadmap. According to the European 5G Action Plan, European 5G experiments are divided into two phases: the first phase ends in 2018. European countries conduct 5G technology trials in the form of "independent trial alliances" to verify emerging 5G capabilities and cultivate corresponding 5G ecosystems. The second stage is that after the first batch of 5G international standards are frozen, the European mobile communications industry must reach an agreement on the 5G technology test specifications, and use systems that meet 5G standards as much as possible when conducting 5G technology trials. 3) Promote the construction of the 5G ecosystem. In addition to providing financial support for the EU 5GPPP's 5G technology research and innovation projects, the European Commission should also consider allocating part of the funds to vertical industries that conduct 5G technology trials and verifications, and establish a "5G Venture Capital Fund" to cultivate a new wave of entrepreneurship and innovation related to 5G technology.

3.2 Deployment competition: China has abundant Sub-6 frequency bands and leads the way in 5G deployment

Abundant Sub-6 resources are the key to gaining a first-mover advantage in 5G deployment. National 5G deployment is affected by many factors, including national strategy, operator investment, and spectrum resource allocation. Among them, spectrum resource allocation is the most critical and basic factor. At present, mainstream countries in the world mainly use Sub-6 and millimeter wave frequency bands to deploy 5G. Sub-6 has the characteristics of wide coverage and low construction cost. As a newly developed spectrum for 5G, millimeter wave has a small coverage range, the relevant technology is not yet mature, and the deployment cost is much higher than the Sub-6 frequency band. Therefore, mainstream countries in the world have chosen Sub-6 as the main frequency band for the initial construction of 5G.

3.2.1 Spectrum Allocation: China prioritizes the development of mid-band, while the United States turns to millimeter waves due to insufficient mid-band resources

China and Europe took the lead in deploying mid-frequency bands in the early stages of 5G development, the United States gave priority to the development of millimeter waves, and Japan and South Korea completed triple spectrum allocation. China allocated 300MHz spectrum to mobile services in the mid-frequency band, distributed in the 3.4-3.6GHz and 4.8-4.9GHz bands, and issued experimental frequency licenses to three mobile operators. China officially started 5G commercial use in 2019. On June 6, the Ministry of Industry and Information Technology issued 5G commercial licenses to China Telecom, China Mobile, China Unicom ( 5.360 , 0.05 , 0.94% ) , and China Broadcasting Corporation. On October 31, the three major operators jointly announced the launch of 5G services and released corresponding 5G packages. The European Union also proposed in the "5G Action Plan" that the 3400-3800MHz frequency band is the main frequency band for the EU's 5G deployment before 2020. The EU's 5G deployment does not focus on the millimeter wave band, but meets different 5G needs from different low, medium and high frequency bands. South Korea rushed to millimeter waves, but the allocation of low-frequency resources was insufficient. In June 2018, South Korea successfully auctioned 2.4GHz of spectrum in the 26.5-28.9GHz band, with an average of 800MHz per operator; 280MHz of spectrum in the 3420-3700MHz band, becoming the first country to complete the allocation of millimeter waves. However, South Korea's allocation of low-frequency resources is relatively insufficient, with 477MHz of low-frequency spectrum resources available for allocation, ranking second from the bottom among mainstream international countries. Due to the scarcity of low-frequency resources, South Korea's 2×20MHz spectrum auction in the 700MHz band in 2016 failed due to the high price. Japan has allocated abundant spectrum resources in high, medium and low frequency bands, and has allocated 5G spectrum to four operators, involving multiple frequency bands such as 39GHz, 28GHz, 4.5GHz, and 3.7GHz.

The mid-band spectrum in the United States is mainly used for military or commercial purposes, and it is difficult to divide it. Therefore, the United States adopts a millimeter wave priority strategy in 5G construction, regards the auction of high-frequency spectrum as a priority development plan, and allocates abundant high-frequency spectrum resources. The United States released 5G spectrum planning for two consecutive years in 2016 and 2017, authorizing frequency bands including 24.25-24.45GHz, 24.75-25.25GHz, 47.2-48.2GHz, 27.5-28.35GHz, 37-40GHz, 64-71GHz for 5G, totaling 12.55GHz. At present, the United States has completed three national spectrum auctions, and multiple bands of 24GHz, 28GHz, 37GHz, 39GHz and 47GHz have been allocated. The mid-band is crowded and difficult to coordinate in the short term. 3.5GHz is the mainstream international 5G construction band, while the 3.45GHz band in the United States is occupied by military radar systems and is difficult to clear. Most of the 3GHz and 4GHz spectrum is widely used by the US Department of Defense, and the mid-band resources available for 5G deployment are very limited. The US government has proposed that the FCC sell at least 280MHz of spectrum by the end of 2020, but the actual effect is still unknown. Actively release low-frequency resources. The FCC has made changes to the 600MHz, 800MHz, and 900MHz bands to expand the use of low-frequency bands for 5G services. At present, the United States has released a total of 716MHz of low-frequency spectrum.

The construction of millimeter waves in the United States is difficult and the cost-benefit does not match. The characteristics of millimeter waves with short wavelengths and narrow beams limit the propagation distance, so the number of base stations required is high, and the construction cost is double that of Sub-6. In addition, millimeter waves are easily blocked by obstacles such as walls, leaves, and the human body itself, further exacerbating the difficulty of base station deployment. The future 5G ecosystem in most countries in the world is built on the Sub-6 mid-frequency spectrum, and the United States will also face challenges in the universality of millimeter wave equipment and the security of Sub-6 infrastructure. The leadership of wireless networks requires the global market to recognize and follow the spectrum band specifications set by the leaders. Therefore, if the United States continues to explore spectrum ranges that are different from other countries in the world, on the one hand, it will lead to a lack of global supply chain foundation for 5G networking. In addition, even if the United States has a strong technical advantage in millimeter waves, it still cannot dominate the 5G standard discourse due to the lack of followers. Local suppliers in the United States cannot invest in the research and development of future 5G products, and further lose market dominance.

3.2.2 Commercialization progress: 5G commercialization progress exceeds expectations, China, Japan and South Korea officially commercialize

Globally, the commercialization of 5G has exceeded expectations. 5G commercialization was officially launched in 2019. As of January 2020, 356 operators in 121 countries and regions around the world are planning, testing, deploying or have already commercialized 5G. Among them, 62 operators in 34 countries and regions have announced 5G commercial services (including fixed access services and mobile services) under 3GPP standards. Currently, the 5G commercialization plans announced by operators are basically in 2020 and 2021.

Currently, China, South Korea, the United States and some European countries have achieved 5G commercialization. Japan's SoftBank is expected to officially launch 5G services on March 27 this year. South Korea is the fastest in 5G commercialization. In April 2019, it took the lead in the world to launch 5G commercialization. By the end of the year, the three operators had deployed a total of about 190,000 AAU stations in 5G networks, covering 85% of cities and 93% of the population, and the scale of 5G users reached 5 million. Some operators in the United States began small-scale 5G deployment in early 2018, but due to the lack of medium-frequency resources, there were problems with poor signal and coverage of homes; China began to provide 5G services on November 1, 2019, and plans to achieve 5G network coverage in all prefecture-level cities across the country by the end of this year.

3.3 Standards Competition: China leads in the number of SEPs, and Huawei's Polar Code achieves breakthroughs in key areas

The right to formulate 5G standards determines the right to speak in the industry, which is specifically reflected in the number and distribution of standard essential patents. As a new generation of mobile communication network, 5G has undergone major changes in its network architecture, and its modulation, coding, air interface, etc. all require the use of new technical solutions. In order to ensure the universality of wireless communications and achieve economies of scale, countries have joined the 3GPP organization and used the optimal technical solution selected by 3GPP as the standard for 5G network construction. The distribution and composition of standard essential patents (SEPs, Standards-Essential Patents) related to 5G key technologies reflect the right to speak of each company in different key technologies and their industrial practices. SEPs in the 5G field refer to patents that are unavoidable, have no alternatives, and must be used to implement a certain technical standard as determined by 3GPP. The proposals submitted by enterprises to 3GPP are standard technical solutions. After being adopted by 3GPP, written into the standard, and patent applications are applied for at the same time, standard essential patents are formed. After the enterprise's technical solution is adopted as SEPs, it can charge patent licensing fees to any enterprise using the patent, expand its own product market share, and continuously improve its position and right to speak in the industrial chain.

3.3.1 The history of mobile communication development shows that the right to formulate standards is the dominant power in the industry chain

Generally speaking, companies with the right to set standards can obtain generous patent fees, huge market value, and achieve dominance in the global industrial chain. As a patent-intensive industry, the mobile communications industry is inseparable from the communication protocol standards on which it relies. Countries with the right to set standards can further promote their technologies, architectures, and equipment. The monopoly of standards promotes the sales of chips and other equipment, bringing huge market value.

There is a rule that global communication standards are updated every ten years. Qualcomm was the dominant player in the 2-4G era. Qualcomm led the United States to complete a comeback against the GSM standard and achieved global leadership. In the 2G era, GSM promoted by the European Telecommunications Standards Institute (ETSI) was the mainstream standard in the industry; Qualcomm later developed CDMA technology and took advantage of the opportunity when major giants competed for the GSM standard to register a large number of CDMA technology patents. In the 3G era, Qualcomm joined forces with many manufacturers to establish 3GPP2 and formulate the CDMA2000 standard, establishing its dominant position in the CDMA ecosystem. According to incomplete statistics, Qualcomm currently owns more than 13,000 patents, mainly concentrated in the core areas of 3G and 4G, of which about 3,900 are CDMA patents.

Qualcomm's monopoly on CDMA technology standards has brought it huge patent fees. CDMA technology is the underlying technology of mobile communications. End-to-end communications involve base station equipment, operator networks, mobile phone terminals, etc. The entire communications industry must pay a considerable amount of patent fees to the underlying core technology patent owners. Qualcomm's patent fees can be divided into two parts. On the one hand, Qualcomm charges patent fees to mobile phone and tablet manufacturers that use its chips; on the other hand, Qualcomm also charges patent licensing fees to other chip manufacturers that use Qualcomm patents. The patent licensing fees are charged to mobile phone manufacturers that use other chips in the form of whole machine charges. These mobile phone manufacturers need to pay Qualcomm a fixed licensing fee ranging from hundreds of thousands to millions of dollars and a patent licensing fee of 3%-5% of the product sales price each year. The patent business has become Qualcomm's profit cow. In 2018, the patent licensing business contributed 23% of Qualcomm's total revenue and 54% of its total profit.

3.3.2 After catching up in the 1-4G era, China finally gained a leading edge in the 5G era

China has gone through a process of falling behind in all aspects of wireless communication standards, following 2G, breaking through 3G, synchronizing with 4G, and leading 5G. At present, China is far ahead in the number of 5G SEPs, and has also made breakthroughs in the most critical underlying coding technology for mobile communications. In the 2G era, foreign companies dominated technical standards and occupied a dominant position in the market; in the 3G era, China launched its own network standard TD-SCDMA, but the industry's voice was still very low, and domestic companies gradually began to compete directly with European and American companies in the market; in the 4G era, Chinese companies increased their voice in standards, and TD-LTE developed rapidly, making my country's communication technology at the forefront of the world. The research and development of 5G technical standards is a historical opportunity for my country to catch up with the world's advanced level, and it is also a must-fight place for China's communications industry.

In terms of quantity, China leads the way in the number of 5G SEPs. In recent years, the number of 5G SEPs patents has increased dramatically, mainly from China, the United States, South Korea, Europe and Japan. According to Iplytics data, as of November 2019, China had applied for 6,783 groups of standard essential patents, contributed 32,103 to 5G standards, and had 6,512 engineers participating in 3GPP meetings, both ranking first in the world; specifically, Huawei has applied for 3,325 groups of standard essential patents, contributed 19,473 to 5G standards, and had 3,098 engineers participating in 3GPP meetings, exceeding all participating companies. ZTE and China Mobile have also made important contributions to China's standard essential patent reserves and the formulation of standards.

From the perspective of quality, China has made a breakthrough in the key technology of 5G channel coding. 5G networks can be divided into access networks and core networks, and the corresponding wireless interface protocols of the access network can be divided into the physical layer, data link layer and network layer. The physical layer is the core part of the entire system design, accounting for 67% of the number of 5G access network standard essential patent applications. Among them, new modulation technology and channel coding technology are the core and most profound parts of the physical layer design. In the formulation of 5G communication technology standards, Huawei's main Polar Code solution has become the 5G control channel eMBB scenario coding solution.

3.4 Equipment Competition: Four Chinese and European Enterprises Compete for Hegemony, Huawei and ZTE Emerge as New Forces

3.4.1 The main equipment of the 5G industry chain has a large value and a high industrial status

In the 5G industry chain, communication network equipment is the link with the largest value and the highest status in the industry chain. Communication network equipment is the core link of the mobile communication system, involving wireless, transmission, core network and business support system equipment, and the main equipment vendor plays a role similar to that of a general contractor in the entire network construction, providing operators with complete solutions and being in a coordinating position.

3.4.2 The top four global equipment manufacturers compete for supremacy, with Chinese companies having a clear advantage

After years of mergers and acquisitions, the global network communication equipment manufacturers are now in a four-strong competition. With the evolution of communication networks, the main equipment manufacturers are constantly changing. In the 1G era, the equipment market was dominated by Motorola and AT&T in the United States; in the 2G era, European countries took the lead, American manufacturers gradually declined, and European companies rose. Nokia and Ericsson became the two giants in the industry; in the 3G and 4G eras, the original equipment manufacturers continued to merge and integrate, and Chinese companies began to rise. In the 3G era, there were 9 major communication equipment manufacturers in the world: Ericsson, Nokia, Siemens, Alcatel, Lucent, Nortel, Motorola, Huawei, and ZTE. In 2006, Alcatel and Lucent announced a merger, and Nokia and Siemens merged their telecommunications equipment businesses. In 2009, Nortel Networks filed for bankruptcy. In 2010, Nokia Siemens acquired Motorola's wireless department. In 2013, Nokia acquired Siemens' 50% stake in Nokia Siemens. In 2016, Nokia acquired Alcatel-Lucent. Currently, Huawei, Ericsson, Nokia and ZTE have a cumulative market share of 70% in the communications equipment market in 2018, presenting a pattern of four major competitors competing for supremacy.

With Huawei catching up and ZTE catching up, the market share of European equipment manufacturers has been continuously squeezed. From 2013 to 2018, Huawei's market share rose from 20% to 29%, an increase of nearly 2 percentage points each year. Except for a slight decline in market share due to US sanctions in 2018, ZTE's market share has steadily increased from 7% to 10% from 2013 to 2017. At the same time, the market share of Ericsson and Nokia has been declining at a rate of 1% per year. In terms of performance, Huawei's operating income in 2018 was 721.2 billion, higher than the total income of the other three companies; net profit was 60 billion yuan, making it the only profitable company among the four major equipment manufacturers. Among them, Ericsson and Nokia have been losing money for two consecutive years, and ZTE's net profit in 2017 was 680 million yuan. The loss in 2018 was mainly due to the payment of compensation for sanctions.

In the 5G era, Huawei has achieved comprehensive leadership in multiple dimensions such as technology and products. Its 5G commercial contract orders rank first, and more than half of them are in the European market. The "5G Access Network (RAN) Competitiveness Analysis Report" released by GlobalData, an authoritative consulting company in the global ICT industry, pointed out that Huawei ranked first in the overall competitiveness of 5G RAN among the top five equipment vendors, while other equipment vendors were in the second echelon with their own advantages and disadvantages. Huawei ranked first in the four key dimensions that operators value, namely baseband capacity, RF product portfolio, ease of deployment, and technological evolution capabilities. In terms of baseband capacity, Huawei's 5G RAN products have the largest baseband capacity, which can better help operators cope with the massive connection needs of 5G; RF products cover the most spectrum, are small in size, and light in weight, so that operators can flexibly deploy in various scenarios; in terms of technological evolution, Huawei's products can support operators to smoothly evolve to 5G and save 5G network construction costs. According to data from Huawei's London Product and Solution Conference in February 2020, Huawei has currently obtained 91 5G commercial contracts, surpassing Ericsson and Nokia, ranking first in the world. In terms of the geographical distribution of the contracts, there are 47 in Europe, 27 in Asia, and 17 in other regions. As of the end of 2019, 62 operators in 34 countries around the world have officially announced 5G commercial use, and Huawei supports 41 of them, accounting for two-thirds.

4 Outlook and suggestions: New infrastructure to seize the commanding heights of the world's new generation of information technology

New information infrastructure represented by 5G provides underlying support for the development of the smart economy and the digital transformation of industries. Humans entered the steam age in the 18th century, the electrical age in the 19th century, and the information and Internet age in the 20th century. As artificial intelligence technology gradually matures in the future, the 21st century will enter the intelligent age. The intelligent society consists of three strategic cores: first, chips/semiconductors, which are the heart of the information intelligent society and are responsible for the calculation and processing of information; second, software/operating systems, which are the brains of the information intelligent society and are responsible for information planning and decision-making, and resource scheduling; third, communications, which are the nerve fibers and nerve endings of the information intelligent society, responsible for the transmission and reception of information.

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Policy suggestions: Use reform and innovation to accelerate the construction of a new round of infrastructure such as 5G, rather than simply re-take the old path.

First, it is recommended to further relax market access in the field of infrastructure investment, especially to expand channels for private enterprises to participate in infrastructure investment and eliminate restrictions. Fully implement the negative list of market access, and all market entities should be given fair participation opportunities for all industries and fields outside the list, so as to truly achieve equal competition without banning and entry. We must reasonably determine the investment qualifications, and conditions such as registered capital, asset scale, bank deposit certificate or financing intention letter that exceeds the actual needs of infrastructure projects, and access conditions that are not related to project investment, financing, construction, and operation shall not be set.

Second, special supporting policy support for information-related new infrastructure. Since information-related new infrastructure is mostly new technologies and new industries, it needs supporting policy support such as finance, finance, and industry that are different from old infrastructure. In terms of fiscal policy, R&D expenditures are additionally deducted, and high-tech enterprises are low tax rates; in terms of monetary and financial policies, support is provided in low-interest financing, special loans, multi-level capital markets, mergers and acquisitions, IPOs, bond issuance, etc.; in terms of industrial policies, it is included in the national strategy and local economic and social development plans.

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Fourth, make scientific and overall planning to prevent "surge" and repeated construction, or "new bottles of old wine" from causing a lot of waste. We must fully absorb the experience and lessons of the past infrastructure, make overall planning, and clarify the development priorities and order. Local governments need to fully consider the actual situation when formulating investment projects, and cannot blindly advance, so as to prevent ineffective investment and overcapacity.

Source: Zeping Macro