The Real U.S.-China 5G Contest is Just Getting Started

Introduction

On June 6, China declared the three-year anniversary of its business deployment of 5G, with the country having invested nearly 185 billion yuan in related infrastructure in 2021 alone (Xinhua Baoye, June 5). However, China’s 5G ambitions, which continue to form a substantial component of its national and international development policies, began years ago with Huawei. After Apple revolutionized the smartphone, demand for sophisticated computer “chips” and other components skyrocketed. Companies like Taiwan Semiconductor Manufacturing Corporation (TSMC) and Foxconn capitalized on this shift to become the main pillars of Taiwan’s economy. In addition to supplying Samsung, Apple and HTC, a lesser-known, nominally private Chinese company, Huawei was also starting to make smartphones around this time using Taiwanese hardware (Nikkei Asia, 2016).

Although in recent years up to 60 percent of 5G-capable Huawei phone components have been manufactured in China, which is due in large part to U.S. sanctions against it and other Chinese technology companies, a new technological Cold War is unlikely to materialize over 5G. The economic stakes over advanced computing and a new generation of telecommunications infrastructure are too high for the international community to afford any one nation or corporation primacy across the deep and diverse set of software, hardware and human capital requirements this technology will demand.

The U.S.-Huawei Breakup and its Fallout 

In 2015, the U.S. government disclosed that Chinese agents stole massive amounts of U.S. background investigation and other personal information by hacking the Office of Personnel Management (OPM), which is the agency responsible for administering security clearances to Federal employees (OPM.gov). Huawei later came into focus, as the U.S. government designated their equipment and services as a cybersecurity threat. This was due to the potential for Chinese-manufactured equipment to contain “backdoors” or other programs, which could send user data back to the Chinese government. The U.S. government could not or would not provide direct, cyber-forensic evidence for these claims. Nevertheless, Washington maintained that it was not necessary to find “hard evidence” of such activity or programs, based on the presumption that there was ample evidence to suggest that no Chinese company could reasonably deny a request to divulge information or provide data about the users of its products and services if pressed by their own government. [1] 

In addition to defending the credibility and security of Huawei and Chinese State-owned electronics or telecommunications companies, Chinese sources have generally highlighted these companies’ economic reach and performance (Huawei, 2019; Zhitong Caijing, 2021). While Huawei phones have all been shut out of the U.S. market, these and other Chinese smartphone brands such as Oppo, Xiaomi and Honor (a Huawei-affiliated brand) are gaining and even dominating market share practically everywhere else in the world. By one account, 46 percent of 5G smartphones sold in 2019 were Chinese-made, more than any other nation (Counterpoint, 2020). However, the United States and Western Europe have long been the largest markets for smartphones, so it is doubtful that Huawei will ever fully overtake manufacturers like Apple or even Samsung.

Despite this apparent stalemate over smartphone sales, a contest between the West and China has subsequently emerged over 5G, which is considered a fundamental basis of the Internet of Things (IoT), cloud computing, and “Big Data.”

Blanket Coverage

The basic discerning characteristic of 5G is that while it is indeed very fast, it does not have extensive range. Whereas 2G-4G can be delivered through cell phone towers over distances spanning several square miles, 5G physical transmitters must be installed on towers whose signals may cover an area equivalent to four American football fields in the open, or or multiple 5G transmitters must be installed within the same floor or floors of an office building.

Huawei and other major Chinese telecommunications infrastructure manufacturers and developers are building 5G towers across the world, and these companies are also  blanketing their own country with them – more than 60 percent of 5G towers globally are Chinese-made, and 10.1 transmitters are available per each Chinese resident by the government’s last count (Gov.cn, February 12). The U.S. government has criticized these construction projects, suggesting that these systems may be used to siphon data back to Beijing (Federal Communications Commission, 2020). Moreover, quite a few countries have rejected China’s 5G infrastructure and technology after conducting their own risk assessments, and have pledged to develop their own networks or with U.S. help and coordination (Zaobao, May 20).

5G could be very useful for Internet of things (IoT) applications in remote, industrial or transportation settings. Much of the “Big Data” referenced in the media comes from these small sensors, which can be placed in factories, buses or airplanes, or in remote areas to provide large amounts of structured data (such as numbers) and unstructured data (such as text, video and audio) in real-time directly to a cloud server.

The powerful and specialized computers that comprise the cloud can quickly process this information and allow new and near-instantaneous conclusions to be drawn about business and manufacturing processes, the performance of Smart Cities, energy usage, attendance at and real-time visual feeds from major sporting or public events. (GSMA, 2018).

A Global Contest?

Due to the value of these 5G-related cloud computing applications and real national security concerns, Washington has made it progressively harder for Chinese companies to purchase the U.S. chips necessary for mobile and advanced computing applications. As a result, Chinese efforts to indigenously develop advanced semiconductors have accelerated.

Subsequently, semiconductors and 5G have squarely entered the geopolitical realm, in addition to being approached as an economic or technological issue. Newspapers like Nikkei Asian Review have broken down the costs of the major individual components of Huawei smartphones compared to Apple or other competing devices. These essential components include parts like advanced cameras, LCD touchscreens, flash and other memory storage units and processing chips. Nikkei listed the approximate price of each component, along with the country in which the parts were manufactured (Nikkei Asia, May 14, 2020).

Most of the Apple iPhone’s components are currently made in the U.S., Japan, South Korea, or Taiwan. In Huawei’s flagship phone, its processing chip—which is the most valuable and arguably most important manufactured component of any smartphone—is now made in China, along with several other crucial components (Nikkei Asia, August 31, 2021). In this instance, Beijing was able to adapt its 5G production in order to compete with U.S. and Taiwanese hardware supply chains.

Chinese telecommunications companies’ international construction of 5G and basic internet infrastructure has occurred in countries where foreign competitors are hesitant to operate. Notably, Huawei has captured market share in countries subject to U.S. sanctions, and/or those that have welcomed Chinese investment as an alternative to Western funding, which is seen as more conditional, at least as far as significant economic and technological development is concerned (China Daily, March 17). These projects have taken place all over the globe, ranging from Central Asia, Africa, and even Latin America.

Technically, 4G/LTE or Wi-Fi are no longer required for built-from-scratch 5G network infrastructure to function. For example, if a country was never offered advanced Internet because of its government’s human rights record or poor compliance with nuclear nonproliferation treaties, construction of 5G infrastructure still remains possible. In these countries deemed undesirable by nations possessing 4G, Wi-Fi and advanced computing technologies, China appears to have found an opening.

Accessing 5G does not even necessarily require a smartphone or traditional computer. All applications, including voice calls, could be run from a conveniently portable touchscreen device, which requires no advanced, expensive semiconductor chip or hard drive embedded inside of it, since both processing and storage would be conducted in the cloud. All computing tasks and user applications would be conducted directly from the cloud, as the device transmits the results back and forth to the screen via an ultra-fast 5G network.

China’s plan domestically and globally is for its variants of 5G to be everywhere, along with 5G-capable devices it produces. Therefore, beyond just monitoring factories or evaluating the performance of solar energy panels, 5G has the potential to change computing as we know it, in ways we cannot yet possibly comprehend. That is what the U.S. and China are contesting, and what the global community is watching very closely.

Conclusion

Massive uncertainty exists over how this industry will develop, specifically in regards to whether cloud computing can be effectively integrated with myriad other forms of existing technology. For this reason, it is unlikely that a new technological Cold War will develop. The supply and research and development chains of these software and hardware technologies, along with the markets they serve, are far too cross-reliant to be separated.

The economic stakes are also higher than any one nation, even a technological and economic superpower, can bear alone. There are few limits to how powerful computing can be in the cloud, and as augmented, metaverse and virtual reality applications become more widespread and the average user starts to utilize or consume more unstructured data, local computing will become a bottleneck, along with the human talent that designs and supplies creative content.

Furthermore, global demand— particularly in the developing world—for powerful, cheaper, more interconnected and potentially more secure mobile and personal computing solutions will continue to rise. Cloud computing with 5G could address this need, and China clearly now has many of the cards in hand. However, international politics, computing technology and the modern global economy are more complicated than who can build the most 5G towers.

In order to make 5G work at its full potential as described previously, one needs more than just physical infrastructure. Specialized hardware and software which are designed to work with this version of a cloud computing model, or in tandem with the local device-based computing model, will have to be developed. Tangible technology ecosystems must be nourished as well, and applications and software must be tested and re-tested in diverse environments. In this regard, the U.S. and other advanced economies are well-positioned in what will undoubtedly be a decades-long process of transitioning to a 5G and even a 6G world.

Ultimately, trends point towards a necessary global collaboration on 5G. That said, no country wants to be dominated by another country or corporation. If the digital future of one nation is in the metaphorical hands of another one, there are going to be questions raised, even if everything works perfectly, and regardless of whether it is China, or the U.S., or Foxconn who are providing the users’ entire digital suite.

Philip Hsu is a technology consultant based in Shanghai. He is a graduate of Columbia’s School of International and Public Affairs and Georgetown’s Walsh School of Foreign Service.

Notes

[1] For discussions of these concerns, see Arjun Kharpal, “Huawei says it would never hand data to China’s government. Experts say it wouldn’t have a choice, CNBC, March 5, 2019, https://www.cnbc.com/2019/03/05/huawei-would-have-to-give-data-to-china-government-if-asked-experts.html; Murray Scott Tanner, “Beijing’s New National Intelligence Law: From Defense to Offense,” Lawfare, July 20, 2017, https://www.lawfareblog.com/beijings-new-national-intelligence-law-defense-offense;