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In a momentous development that serves as a key milestone in Beijing’s ambitions to become a technological superpower, Chinese carriers have now officially launched 5G services in the country despite initial expectations of a 2020 debut.
China’s three major state-backed carriers – China Telecom (HKG:0728), China Unicom, (HKG:0762) and China Mobile (HKG:0941) – have now inaugurated 5G plans that are quite similar and start from 128 yuan ($18) per month for 30 GBs of data and 500 minutes of calls. Subscribers of China Mobile will be able to avail 300 GBs of data with download speeds of up to 1 Gbps for 599 yuan ($85) while the entry-level plans will only offer download speeds that are capped at 300 Mbps.
China is well on its way to adopting the mantle of the largest 5G market in the world. According to the state-backed Xinhua publication, 5G commercial services are now available in 50 Chinese cities, including Beijing, Shanghai, Guangzhou, and Shenzhen. Moreover, authorities plan to install over 50,000 5G base stations across major Chinese cities by the end of this year. As a result, China has now become the second country in the world to have a nationwide 5G rollout with South Korea having the distinction of being the first one to do so. Additionally, according to the cellular industry body GSMA, the Asian giant will account for the largest number of 5G connections by 2025, far ahead of North America and Europe combined. The Jefferies Group (NYSE:JEF), an American multinational investment bank and a financial services company, said in a note this week that China’s 5G penetration is expected to cross 7 percent or 110 million users in 2020. For reference, South Korea’s current penetration stands at 3 percent. Furthermore, as per a study by the state-run China Academy of Information and Communications Technology, China is likely to spend a gargantuan $130 billion to $217 billion on 5G-related infrastructure between 2020 and 2025.
Despite the euphoria surrounding this milestone, China still has to contend with a few hurdles in the 5G sphere. Even though 5G services in China have been priced cheaper than 4G on a per-gigabyte basis, some analysts are still concerned that the service might be too expensive. Jefferies analyst Edison Lee voiced this concern by stating that, “We are amazed China’s 5G price plans give an average price per GB (US$0.39) that is almost identical to Korea’s (US$0.38). As China’s per-capita income is 69% below that of Korea, similar pricing would likely mean China will have a lower penetration than Korea.”
Another hurdle arises from the trade war that the U.S. and China are currently embroiled in. The dispute has now morphed into a quest for technological supremacy and one-upmanship with the 5G sphere increasingly becoming a key battleground and a politically charged topic. President Donald Trump said earlier this year that “the race to 5G is on and America must win.” Earlier in June, the U.S. Commerce Department added the Chinese tech behemoth Huawei to the Entities List over national security concerns and for violating U.S. sanctions on Iran (read our related coverage here). The step bars Huawei from seeking sensitive components from American companies without a prior approval from Trump administration. Thereafter, in August, the Trump administration barred the use of federal grants for the purchase of telecommunications equipment from five Chinese entities including Huawei. These restrictions have now raised doubts over Huawei’s ability to maintain its current manufacturing pace of 5G base stations which, in turn, may slow down China’s plans for a 5G revolution.