China: Updates and Market Opportunities in the World’s Largest Next-Generation Mobile Network Market

From the latest financial figures (1H 2022) posted by China’s big three Mobile Network Operators (MNOs)—China Mobile, China Unicom, and China Telecom—we can see an increase in mobile services revenue and a strong penetration rate and consumer take-up of 5G in China.

Mobile services revenue was up 8.4% Year-over-Year (YoY) to ~US$61.5 billion for China’s largest MNO, China Mobile. Revenue for China Telecom and China Unicom mobile services was up 6.0% YoY to ~US$14.28 billion and 3.4% YOY to ~US$12.25 billion, respectively. Consumer take-up of 5G continues strongly in China, with China Telecom’s 5G penetration rate at 60%, China Unicom at 58%, and China Mobile at 53%. For all three MNOs, 5G user growth continues on its upward trajectory. China Mobile recorded an increase of ~30% YoY of 5G subscribers (511 million), China Telecom jumped by ~23% (231.65 million) over a half-year period, and China Unicom saw an increase of ~19% in 5G subscribers (184.92 million) YoY. China Mobile is the clear winner with 5G Average Revenue per User (ARPU) gains of ~US$12.30, China Telecom at ~US$7.60, and China Unicom recording ~US$3.75.

Consumer 5G: A World of New Opportunities

5G consumer momentum continued strongly in China with innovative digital services and applications. 5G’s key strengths are increased bandwidth and consistency, as well as reduced latency. Recently launched 5G consumer applications have been largely centered around two key areas: 1) video, and 2) Augmented Reality (AR)/Virtual Reality (VR) applications.

Applications such as multi-channel Ultra-High-Definition (UHD) live broadcast, multi-screen viewing, VR-enabled e-sports and movies, and live VR broadcasts only work properly over 5G if the downstream speed needs are sufficient for users to have an immersive experience. Sports broadcasting has been one of the best developed use cases for consumer 5G. The 5G cloud-based broadcast technology by China Unicom, the official telecommunication services partner for the Beijing 2022 Winter Olympics, allowed people to enjoy the event anytime and anywhere simultaneously in real time. Migu, the digital content subsidiary of China Mobile, has used 5G technology for live broadcasting of sport events in 4K, as services to display and check tens of thousands of short videos spread across various media channels, and for a rapid push news service that produces short videos and distributes them in as little as 10 minutes. AR and VR have also taken full advantage of 5G’s capabilities, and it has been used across gaming, retail shopping, and entertainment activities to enhance consumer experiences. Also, by leveraging 5G and AR/VR technologies, Migu and China Mobile’s Fujian branch are building a metaverse headquarters in Xiamen, Fujian province in a strategic partnership with the local government.

Enterprise 5G: Digital Transformation for Businesses

China has also led the way with private enterprise 5G networks. 5G technology has been the enabler for many use cases across different industrial sectors, fueling digital transformation for many industries.

A private industrial 5G network was deployed at Baosteel, an iron and steel manufacturer, for use cases such as real-time online monitoring of high-risk operations and 5G robots with industrial High-Definition (HD) cameras for inspecting conveyor belts. 5G’s features have also proved valuable in medical services and the Futian District Medical Consortium has deployed a regional 5G healthcare network for its hospital operations, such as remote consultations, mobile medical care, emergency care, and smart wards. The Beijing Daxing International Airport has employed 5G+AI for 5G-based facial Identity (ID) check-ins, and 5G+AR to help service staff improve customer service quality and baggage management operations. The Port of Tianjin, one of the world’s largest, has largely automated operations with intelligent unmanned remote crane operations and container loading using a 5G private network. In the Xinyuan Coal Mine, 5G technology has enabled the remote inspections of coal mines and automated mining operational processes.

Since the launch of its commercial 5G networks in September 2019, China has cemented its place as one of the world’s main drivers and pacesetters in 5G with the world’s largest 5G network and the most users. According to China’s Ministry of Industry and Information Technology (MIIT), close to 2 million 5G base stations have been deployed and China’s 5G users have accounted for more than 80% of the estimated global user base. Globally, 5G adoption is expected to accelerate and is set for rapid growth. The ultra-low latency and high bandwidth capabilities of 5G are crucial for enabling many use cases in immersive technologies, such as AR, Mixed Reality (MR), and VR. ABI Research forecasts that shipments of global AR and MR smart glasses will reach ~30.58 million annually and VR Head-Mounted Displays (HMDs) will hit ~72.93 million by 2026. VR HMD revenue is expected to be worth potentially ~US$22.73 billion in 2026.

There are considerable expectations around enterprise 5G in China. 5G technology looks set to take off in heavy industrial sites, as the technology would be useful for automating labor-intensive or dangerous operational processes, remote operation of heavy machinery, performing quality control checks, etc. 5G technology will continue to break new ground and enter more industries, such as construction, power grids, medical services, manufacturing, logistics, transportation, energy, mining, etc. Proactive government support will also be a key factor for deploying private 5G networks as the government has outlined a 2023 goal of 5G penetration rate of over 35% for its major industries and also plans to build out more than 3,000 private 5G enterprise networks. ABI Research forecasts that the enterprise 5G market revenue potential in China will reach a combined ~US$7.65 billion in 2026 for the manufacturing, healthcare, utilities, logistics, media & entertainment, energy resource extraction, and natural resource extraction verticals. There are, however, concerns that China’s 5G momentum might slow down as the economy takes a hit from the global economic slowdown and China’s zero-COVID-19 policies.