The research division of China’s Ministry of Industry and Information Technology (MIIT) released a white paper last week that identifies three industry groups as 5G beneficiaries, with equipment makers representing the biggest group.
The China Academy of Information and Communications Technology predicts 5G technology in China will drive 6.3 trillion yuan ($930 billion) of economic output by 2030, according to reports. By 2030, 5G-related sectors will generate around 2.9 trillion yuan of economic value added and 8 million new jobs.
The equipment makers in the report include all hardware and handset makers and include exports. Internet-related companies that provide 5G-related services will be the second largest group of beneficiaries, but it will likely consist of a wide range of companies, from e-commerce and live streaming to self-driving software and telemedicine application developers, according to an industry note that Jefferies analysts distributed to investors last week.
Telcos are the last group of beneficiaries, but the analysts are still recommending a “buy” on China Unicom. “If the government wants Unicom to build a 5G network of reasonable scale so as to compete with CM (China Mobile) and CT (China Telecom), we believe lowering its cost structure by giving it the spectrum at 700 MHz is the only way to achieve that,” wrote analysts Edison Lee and Timothy Chau. “The entire industry’s capex will likely not fall a lot but all the savings could go to Unicom, which should be a boost to its valuation.”
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China’s MIIT recently issued a public opinion request for 5G spectrum at 3.3-3.6 GHz and 4.8-5.0 GHz and followed that up with a request for detailed feedback on the potential use of higher frequencies for 5G, namely 24.75-27.5 GHz and 37-42 GHz. These frequencies are part of the ITU-suggested spectrum for 5G and have strong support in the U.S. and South Korea, the analysts noted.
In a research note earlier this month, the analysts said they believe modulation, antenna and RF technologies will be even more important in 5G than 4G due to the need for 5G equipment—both handsets and base stations—to handle a much wider range of frequencies.
“Having learned the lesson from promoting its own standard in 3G (i.e., TD-SCDMA), China is now highly determined to support global compatibility in 5G,” the analysts wrote. “Since high frequencies will likely be officially adopted by the ITU as part of 5G spectrum, and the U.S. and Korea will likely lead the way in adopting millimeter-wave technology, China will continue to closely study high frequencies for possible future adoption. This will support China's ambition to become a leader in the 5G global supply chain.”
The most likely long-term scenario is that many countries will deploy different combinations of low, mid and high frequencies for 5G, depending on spectrum availability and whether governments/carriers emphasize super hot spots or lower-cost wide area coverage, they added.