2020 China’s 5G New Infrastructure Report

Source:iResearch August 23,20217:24 PM

Significance of 5G New Infrastructure-Economy

The huge capital investment in 5G new infrastructure will drive China’s economic growth

Measures taken to control the Covid-19 pandemic have negative influences on China's economy. The outbreak of Covid-19 in other countries and the slow recovery of China's economy have lasting influences on China's economic growth. The construction of 5G networks requires a large amount of money, which will effectively promote the development of upstream and downstream enterprises in the industry chain, thereby driving China's economic growth. Since the issuance of 5G licenses in June 2019, the three major operators in China have made great efforts to build 5G networks. Their investment in the construction of 5G networks was 41.17 billion yuan in the second half of 2019 and will reach 180 billion yuan in 2020 thanks to  new infrastructure policies. The construction of 5G networks needs a long time and operators will continue to invest heavily to achieve national coverage in the next 4-5 years. After the issuance of 4G license in December 2013, the three major operators invested about 830 billion yuan in the construction of 4G networks within 6 years. Compared with 4G network construction, 5G networks needs more base stations and higher construction cost of each station. Therefore, the overall investment in 5G network construction will be higher than that in 4G networks. The high investment in 5G new infrastructure will keep driving the economic growth of China in the next few years.

Telecom Operators Are the Investment Subjects of 5G New Infrastructure

Operators need to invest more in the construction of 5G network and the payback period may be longer than that of 4G.

Telecommunication operation is an heavy asset industry. Operators are investors and the construction of mobile networks requires a lot of time and money. Taking 4G as an example, if operating cost is not taken into consideration,  the cumulative revenue of the operator’s 4G network wouldn't be larger than cumulative construction investment and achieve profitability until the third year. From the perspective of investment in 5G networks construction, both the growth of 5G base station numbers and the increase in the construction cost of a single station  lead to higher 5G construction cost. Judging from the migration speed of individual users, 4G networks can meet the current daily mobile Internet application needs and the 4G users are less eager to become 5G users than they were when changing from 3G users to 4G users. Therefore, the growth rate of 5G business revenue from individual users may be low. From the perspective of the business users' development speed, the integration of 5G and industries is still in the pilot stage and needs a long time for cultivation. In the early stage of 5G network construction, the revenue from business users may account for a small proportion. Generally speaking, the operators need to investment more in the construction of 5G networks than 4G networks and wait longer for payback.

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