Telecom in China
China Telecom launches 5G standalone cloud native network with Tianyi Cloud
China Telecom claims it has launched what it says is the world’s largest 5G standalone (SA) network. Executives announced the start of commercial 5G SA operations during a company virtual conference last week and said their 5G SA network is currently supported by 30 devices, with 100 expected by year-end.
China Telecom’s 5G SA end-to-end capability testing with Tencent and Huawei was completed in September. Earlier in the week, China Telecom said it will offer 5G SA services to over 300 cities in China at a press event held with Qualcomm at Guangzhou, China.
Like all the other telcos on the path to 5G SA (only T-Mobile US has deployed it), China Telecom’s is said to be 5G SA is a cloud native network called the “Tianyi Cloud.” Company leaders said it’s 5G SA cloud network can guarantee “five-nines reliability,” secure network slicing and latency of below 5ms. In particular:
With the popularization of cloud computing, hybrid multi-cloud has become the new normal for cloud migration. It is just necessary to realize high-speed network interconnection and unified management between multi- clouds. The full-stack hybrid cloud launched by Tianyi Cloud realizes the same technical architecture of the underlying cloud platform and has no cloud capabilities. It extends and covers the deployment of three scenarios: edge, private cloud, and industry cloud. At the same time, it provides first-line multi-cloud capabilities, a dedicated line connects multiple mainstream public cloud service providers at the same time, and high-speed interconnection between public and private clouds can also be realized. In addition, it is worth mentioning that Tianyi Cloud’s full-stack hybrid cloud has been adapted to national production and production at the chip, hardware, and operating system levels, and has the ability to provide national production and service services.
The new generation of cloud-native database developed by Tianyi Cloud completely independently developed and technically tackled key problems. It successfully realized the de-IOE of China Telecom’s core IT system database. Telecom users and billion-level terminal equipment access. Through continuous upgrading and evolution, Tianyi Cloud’s new generation of cloud-native database has reached financial-level data security and high reliability, and has continuously broken through the limits of scale and performance, while being compatible with a complete database ecological chain, so as to meet customers’ diverse data service needs.
Also, China Telecom officially launched the “Cloud Terminal” plan at the event. Tianyi Cloud, as the base of the cloud terminal strategy, has independently created a cloud computer through computing in the cloud, data in the cloud, application in the cloud, security in the cloud, and imagination in the end mode. And cloud mobile phone products.
President and COO Li Zhengmao said the arrival of the 5G era provided the opportunity and the technical ability for the integration of cloud and the network.
In terms of 5G cloud integration, Hu Zhiqiang said:
“In the 5G era, cloud-network integration has entered a new realm. Cloud-network integration is the goal that Tianyi Cloud pursues.” On the one hand, Tianyi Cloud launched an intelligent edge video cloud to break through the bottleneck of ultra-high-definition real-time encoding technology. At the same time, it has real-time scheduling capabilities of millions of video streams. On the other hand, 5G is a cloud-based network. Tianyi Cloud provides 99.999% reliability guarantee and exclusive slice data security, achieving a comprehensive TCO reduction of more than 90%, and a delay of less than 5ms.”
A white paper presented at last week’s event describes China Telecom’s cloud-network integration as driven by open sharing, open network capabilities, multi-network access 5G and SD-WAN support. The China Telecom paper said the company was a hybrid multi-cloud strategy, integrating Alibaba Cloud, Tencent Cloud, Huawei Cloud, AWS, Azure and others into its aggregation platform.
In conclusion, Hu Zhiqiang said: “China Telecom Tianyi Cloud will continue to strengthen technological innovation, strengthen open cooperation, and accelerate the construction of a digital China and a smart society, and make greater contributions with partners.”
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References:
http://www.c114.com.cn/news/117/a1143514.html
https://www.lightreading.com/asia/china-telecom-gets-cracking-on-5g-standalone/d/d-id/765464?
China says it has deployed 700,000 5G base stations this year; Huawei’s forecast
ZTE reports strong 1st Half 2020 financials; 5G Flexhaul; Automatic Antenna Pattern Control Trial with China Mobile
ZTE reported strong first half financial results, with operating revenues up 5.8 percent from the year before to RMB 47.20 billion and net profit increasing 26.3 percent to RMB 1.86 billion. Net profit after extraordinary items increased 47.4 percent to RMB 0.9 billion. The operating cash flow grew over 61 percent to RMB 2.04 billion while spend on research and development (R&D) advanced to RMB 6.64 billion.
In the first half of 2020, the company strengthened its cash flow and sales revenue collection management. Its net cash flow from operating activities for H1 2020 is approximately RMB2.04 billion, about 61.1% year-on-year growth. With great commitment to 5G R&D investment, the company’s R&D spending increased to RMB6.64 billion in H1 2020, covering 14.1% of operating revenue.
In light of the coronavirus pandemic and its impact, ZTE decided to push its R&D initiatives and to take advantage of the mega shift brought on by its own ongoing digital transformation. The company also focused on customer service, helping to achieve a steady growth of business.
ZTE put its in-house new-generation core chipsets for access, bearer and fixed-networks into large-scale commercial deployments, further improving the performance, integration and energy efficiency ratio of its chipsets. The company is also focusing on strengthening its algorithm processes, new materials and new technologies in general, as it helps build 5G commercial networks and works towards becoming the “ultimate” cloud company.
In terms of operator network business, ZTE, underpinned by the rapid 5G rollouts in China, achieved revenue of RMB34.97 billion, a year-on-year growth of 7.7%. (Note that ZTE and Huawei were recently banned from the UK’s 5G rollouts). In 1st half o 2020, the company continuously strengthened the landscape of global network infrastructure.
Proactively taking advantages of new infrastructure construction and new services, ZTE further explored market growth opportunities, with the revenue of ZTE’s government and enterprise business reaching RMB4.82 billion, a year-on-year growth of 2.5%. The company further explored high-value overseas markets while promoting healthy operations during the period.
In its consumer business, ZTE has continuously strengthened its 5G terminal (mostly smartphones) agreements with over 30 wireless network operators around the world, with a focus on China’s “open market.”
Moving forward, ZTE says it will continuously strengthen the research and development, operate steadily and proactively address the risks and challenges in the global markets, thereby achieving the quality growth. Meanwhile, the company will seize the opportunities of new infrastructure and network technology innovations to expand its market shares, accelerate the digital transformation, and improve the organizational efficiency, so as to become an ultimate cloud company.
The company recently announced its 5G Flexhaul solution, which adopts a minimal forwarding plane architecture and a cloud-native control plane to provide 5G fronthaul, midhaul, and traditional backhaul, flexibly meeting the differentiated needs of 5G multi-scenarios and the ultimate performance challenges of 5G services. Based on a full range of self-developed and the industry’s only “3-in-1” highly integrated 5G bearer chip, combined with the pioneering FlexE Channel technology, ZTE’s 5G Flexhaul solution not only provides ultra-large bandwidth capabilities, but also supports massive connections for different services Provide differentiated SLA guarantee and network slicing capabilities to provide customers with a flexible, scalable, and operable 5G bearer network.
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ZTE’s announced financial report comes one day after the company said that it has completed the trial of Automatic Antenna Pattern Control (AAPC) self-optimization solution in Guangzhou, China along with the Guangzhou branch of China Mobile.
By means of the seamless integration between the AI technology and the network structure optimization, this solution can greatly simplify the optimization and O&M of the 5G Massive MIMO network, thereby effectively improving the efficiency and reducing the costs.
The trial result shows that the network coverage rate has increased by nearly 12%, and the signal strength has increased about 4-to-5 dB while the signal-to-noise ratio has increased nearly 1-to-2 dB and the download rate has risen by about 10%.
The solution is based on ZTE’s intelligent AAPC optimization tool, employing the AI algorithm and the network management platform to quickly search and lock the optimal antenna parameters in complex scenarios. According to the MR (measurement report) data, the solution can accurately evaluate the quality of the network coverage.
In addition, the solution has adopted an AI model to achieve the iterative optimization, and the optimal matching between scenarios and antenna parameters, so as to create an end-to-end operational solution of self-configuration and self-evaluation.
Moving forward, ZTE and China Mobile will further explore various complex scenarios, and develop a larger-scale AI self-optimization system, expecting to accelerate the transformation and upgrade of intelligent networks.
About ZTE:
ZTE is a provider of advanced telecommunications systems, mobile devices and enterprise technology solutions to consumers, operators, companies and public sector customers. The company has been committed to providing customers with integrated end-to-end innovations to deliver excellence and value as the telecommunications and information technology sectors converge. Listed in the stock exchanges of Hong Kong and Shenzhen, ZTE sells its products and services in more than 160 countries.
References:
https://www.zte.com.cn/global/about/news/20200828e1.html
https://www.zte.com.cn/global/about/news/20200827e1.html
https://www.zte.com.cn/china/solutions/201905201708/201905201738/5G_Flexhaul
ZTE facilitates 4G and 5G co-evolution with a comprehensive set of solutions
COVID-19 has changed how we look at telecom infrastructure, cloud and AI
by John Strand, Strand Consult, Denmark; edited for clarity by Alan J Weissberger
The coronavirus (COVID-19) crisis has proven that telecom infrastructure is critically important. Telecommunications networks delivered service during the lockdown, enabling many to continue to work, learn, shop, and access healthcare.
Policymakers will likely revisit regulation for telecom networks, not only to optimize network investment, but to improve security. Indeed, policymakers will also realize that security which has focused to date on the transport layer of networks is leaving the access and applications layers vulnerable.
While the focus on Huawei is long overdue, the discussion of network security and Huawei’s role are oversimplified. It is insufficient to address only one aspect of conventional components of networks: access, core, and transport.
The bigger issues are how end-user data will be protected while stored in the network/cloud and processed by artificial intelligence (AI) agents? Also, how will connected devices on Internet of Things (IoT) networks and other applications (such as smart city solutions) can be secured?
Historically network connectivity was likened to the dumb pipe, the medium which transmits data. The “smart parts” of the network were the edge and the core, where users access networks and where information processing occurs. These actions have become more complex with third party providers of AI and cloud computing. Naturally, these models don’t fit 5G because intelligence must exist throughout the network. However, telecom regulation has been associated with these three traditional functions.
Now that networks have evolved, it’s time for telecom regulation to evolve. If the goal of security measures is to reduce the risk and vulnerability of exposure to Chinese state-owned and affiliated firms, then policymakers need holistic frameworks that address the multiple aspects of network security at its various layers: application, transport, and access.
Indeed, the singular focus on Huawei in connectivity misses the fact that Huawei sells products for the other layers, and that many other Chinese state-owned firms should be scrutinized. For example, Baidu, WeChat, Alibaba, and Huawei provide AI solutions in the Applications layer; Huawei and ZTE in transport; and Huawei smartphones and laptops by Lenovo (the world’s leading maker of laptops as well as a leader in servers).
Strand Consult has described this in the research note The debate about network security is more complex than Huawei. Look at Lenovo laptops and servers and the many other devices connected to the internet.
The EU’s 5G Toolbox is the first step towards greater security and accountability for a discrete part of 5G network transport, but it does not address all elements of 5G security nor other layers. In performing its security assessment, the United Kingdom looked beyond 5G mobile Radio Access Networks (RAN) and Core to other network layers, types and technology, notably wireline networks. Policymakers need a broader focus than 5G when assessing the security of telecommunications networks in the future. Policymakers need to look at Huawei’s movement into cloud and AI solutions in the application layer as well as the many state-owned Chinese firms in the access layer like Lenovo.
In China, Huawei is vertically integrated and delivers a suite of products and services for all the layers of a network: it transports the data; it provides access through end user devices, and it provides the applications in the form of AI and cloud solutions. While European policymakers debate issues of RAN and core, Huawei is busy selling other solutions for the rest of the network: smartphones, routers, AI, and cloud solutions. As restrictions tighten on Huawei’s network products, the company will naturally push other business lines to compensate for lost revenue. A large operator in Europe works with Huawei on a joint Chinese-German cloud platform, and the reference customer for this solution is the European Organization for Nuclear Research, CERN in Switzerland. It is not logical how Huawei which can be deemed high risk for telecommunications and military networks, but somehow neutral for nuclear research. The agreement for the project is four years old; the question is whether such a project will be acceptable for political and security standards going forward.
Vertical integration was the standard model for traditional state-owned telecommunications. The government built a telephone network (the wires and switches); it delivered a single service – telephony; and it sold the end user device, typically a classic phone. Privatizing networks was about opening up the value chain to different kinds of providers. This worked well in mobile networks; different firms specialized for different parts of the value chain. However, Huawei is driving the decentralized chain back to the state-centered concept, perhaps fitting for its practice in China where it partners with the government to deliver full-service surveillance solutions.
Policymakers, regulators, and competition authorities have long been skeptical of vertical integration in telecommunications, and it was frequently a way to control traditional telecom operators by demanding that the divest certain parts of their business or by prohibiting certain acquisitions.
COVID-19 has proven that telecommunications networks are vital infrastructure at all layers and levels. It’s not just military and public safety networks that need to be secure. Everyone needs to have secure networks if we are live in a digital society. If politicians and telecom operators don’t recognize this, network users do. Change is being driven by companies which themselves are increasingly victims of cyber-attacks. Companies are putting increased pressure on telecom operators and governments to do more to make networks secure.
John Strand of Strand Consult
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Six big issues on the future of telecom regulation:
Strand Consult believes that governments will take a broader view about network security. Here are six categories of issues for policymakers to consider.
- What is critical infrastructure, and how will it be defined in the future? Historically, critical infrastructure had to do with physical and digital network assets which are required for physical and economic security, health, and safety. Indeed, there are many vital network assets deemed “critical” including those for chemicals, communications, manufacturing, dams, defense, emergency services, energy, financials, food/agriculture, government facilities, healthcare, information technology, nuclear reactors, transportations systems, and water/wastewater. Are these networks equally prioritized? What are the security concerns and protocols for each, both on the physical and cyber fronts? Do some have greater security than others? How does this change in the COVID-19 world?
- What are the government’s responsibilities to ensure the security of communications infrastructure?What are the minimum requirements to restrict a vendor? How is this balanced with requirements for fair and open processes for bids and tenders?
- What are the relevant communications networks to secure? Is it enough to focus on 5G mobile RAN and core or should security requirements apply to wireline networks, satellite, Wi-Fi, 3G/4G and so on?
- Is it sufficient only to address the transport element of network security? How will security be ensured for the storage and processing of data, for example on the computers, laptops, and servers provided by Chinese state-owned Lenovo where China’s rules for surveillance and espionage also apply? What about apps like TikTok and Huawei’s AI and cloud solutions?
- Who should perform the security assessment? Telecom operators, military departments, intelligence agencies, private security consultants, law enforcement, or some other actor?
- How will shareholders account for increased security risk in networks? Have shareholder asked relevant questions about operators’ security practices and the associated risk?
Strand Consult believes it is dangerous for telecom operators to make the decision about Huawei themselves without involving the authorities.
There are a lot of arguments for why telecommunications companies should involve the competent and relevant authorities. Telecom operators must understand that If telecommunications companies assume responsibility as those who assess each supplier in relation to national security, they will be held responsible when things go wrong.
When you take on a responsibility, you also take on risk. Thus, shareholders are exposed to increasing risk when using high risk vendors. The historical facts show that telecommunications companies have been wrong in the past when assessing cooperation with partners which have proven to be corrupt. Some partnerships have cost shareholders billions of euros. In practice, operators are limited in their ability to judge whether partners and vendors are trustworthy.
Strand Consult’s research shows that is not only government, intelligence, and security officials who are concerned about companies like Huawei. Nor is it just telecom operators which build and run networks. It is the small, medium, and large enterprises that use networks that fear that their valuable data will be surveyed, sabotaged, or stolen by actors associated with the Chinese government and military. Consequently, it is the clients of telecom operators which push to restrict Chinese made equipment from networks. This is described in this research note, The pressure to restrict Huawei from telecom networks is driven not by governments, but the many companies which have experienced hacking, IP theft, or espionage.
What the future looks like – just ask the banks:
If you want to see the future of the telecom industry, look at what happened with banking. European banks have been required to implement Anti-Money Laundering (AML) and the Counter Terrorist Financing (CFT). About 10% of European banks employees are today working with compliance. Telecom authorities, defense officials, and other policymakers and will likely see cybersecurity is vital for Europe and that telecom infrastructure is critically important. So just as the banks have been put under a heavy regulatory regime to address corruption and financial crimes, the telecom industry will be required to implement deterrence of cyberattacks.
In practical terms, the authorities in the EU and in each nation state will likely make some demands that challenge the network paradigm that telecommunications companies operate today. The rules will likely be so rigid that they will effectively eliminate Huawei and other Chinese companies from being vendors without making explicit bans. However, it won’t be governments alone driving the charge. Corporate customers of telecom networks, companies that have experienced hacking, IP theft, or espionage, will also join the effort. This is described in this research note, The biggest taboo in European telecom industry is the cost of cybersecurity – just ask the banks.
Copyright 2020. All rights reserved
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About Strand Consult:
Strand Consult, an independent company, produces strategic reports, research notes and workshops on the mobile telecom industry.
For 25 years, Strand Consult has held strategic workshops for boards of directors and other leaders in the telecom industry. We offer strategic knowledge on global regulatory trends and the experience of operators worldwide packaged it into a workshop for professionals with responsibility for policy, public affairs, regulation, communications, strategy and related roles.
Learn more about John Strand: www.understandingmobile.com
Learn more about Strand Consult: www.strandreports.com
Strand Consult
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U.S. Government Attempts to Strangle Huawei; China-U.S. Trade War likely to Accelerate into HYPER-DRIVE mode
On Friday, the U.S. government said it would impose export restrictions designed to cut off Chinese tech giant Huawei Technologies Co. from overseas suppliers, threatening to ignite a new round of U.S.-China trade tensions. The U.S. Commerce Department said its new sanctions would “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”
These new restrictions stop foreign semiconductor manufacturers whose operations use U.S. hardware, software and technology from shipping products to Huawei without first getting a license from U.S. officials, essentially giving the U.S. Commerce Department a veto over the kinds of technology that Huawei can use.
The restriction further tightens the U.S. export-control system’s existing rules related to Huawei. Washington alleges that Huawei gear could be used by Beijing to spy globally, which Huawei has repeatedly denied.
A logo of Huawei retail shop is seen through a handrail inside a commercial office building in Beijing.
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U.S. Commerce Secretary Wilbur Ross said Friday that Washington wants to prevent Huawei from evading sanctions imposed earlier on its use of American technology to design and produce semiconductors abroad. “There has been a very highly technical loophole through which Huawei has been able, in effect, to use U.S. technology with foreign fab producers,” Ross said in an interview on Fox Business Network. He said the changes announced Friday were tailored moves “to try to correct that loophole and make sure that the American fab foundries are competing on an equal footing with the foreign ones.”
Also on Friday, a senior administration official said there were “legal, human rights, and strategic rationales” for the actions against Huawei. Those included Huawei’s alleged theft of intellectual property and aid in developing surveillance technology and new weapon systems, the official said.
Under the new rules, the department can block the sale of semiconductors manufactured by Taiwan Semiconductor Manufacturing (TSMC) for Huawei’s HiSilicon subsidiary, which designs chips for the company, as well as chips and other software produced by manufacturing facilities in Taiwan, China and South Korea, which use American chip-making technology. The Commerce Department already had the ability to license software shipments from U.S.-based facilities.
Companies can apply for a license to continue supplying tech products to Huawei, but the administration said the presumption would be to deny those requests.
John Neuffer, the president of the Semiconductor Industry Association, which represents chip makers, said his group was concerned that the rule would “create uncertainty and disruption for the global semiconductor supply chain.” He added, however, that it appeared less damaging than broader approaches the administration had previously considered.
Huawei had no immediate comment.
China’s foreign ministry, in a statement, urged the U.S. to immediately halt “its unreasonable suppression against Huawei.”
“The U.S.’s practices not only harm the legitimate rights and interests of Chinese enterprises, but also do not accord with the interests of U.S. enterprises, and cause damage to the global industrial chain, supply chain and value chain,” it said.
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On Sunday, China’s commerce ministry said it will take “all necessary measures” in response to new U.S. restrictions on Chinese tech giant Huawei’s ability to use American technology, calling the measures an abuse of state power and a violation of market principles.
An unidentified spokesperson quoted Sunday in a statement on the China ministry’s website said the regulations also threatened the security of the “global industrial and supply chain.”
“The U.S. has utilized national power and used the so-called national security concern as an excuse, and abused export controls to continue to suppress some particular companies in other countries,” China’s commerce ministry said in today’s statement.
“China urges the U.S. to immediately cease its wrong actions,” the ministry added, calling the restrictions a “serious threat to global supply chains.”
China’s retaliation could take the form of restrictions on U.S. tech firms (Qualcomm, Apple. Intel, Nvidia, AMD, Broadcom, Cisco, even Boeing) selling their products in China.
Victor Gao, vice-president of the Centre for China and Globalisation, a Beijing-based think tank, said there were many ways in which China could retaliate for the new restrictions on Huawei, including selling its huge holdings of U.S. treasury bonds or halting any future purchases, and tightening its controls on Apple products.
“For example, if Beijing declared that all Apple products made in China had to be inspected, which would delay their shipment, in three months, Apple would be dead,” he said.
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China’s state-run newspaper reported on Sunday that the Chinese government was ready to retaliate against the U.S.. The source, who is described as close to China’s government, told the state-run Global Times that China was planning countermeasures, such as “imposing restrictions” against U.S. companies like Apple, Cisco, and Qualcomm. The source also suggested the possibility of China halting Boeing airplane purchases.
“China will take forceful countermeasures to protect its own legitimate rights” if the Trump administration goes ahead with the plan to block essential suppliers of semiconductors from selling those components to Huawei.
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Backgrounder:
U.S. government officials have repeatedly accused Huawei of stealing American trade secrets and aiding China’s espionage efforts, ramping up tensions with the rival superpower while both sides were involved in a long-simmering trade war.
As a result, Huawei has increasingly relied on domestically manufactured technology, but the latest rules will also ban foreign firms that use US technology from make semiconductors to Huawei without US permission. The new restrictions will cut off Huawei’s access to one of its major suppliers of semiconductors- Taiwanese chipmaker TSMC (world’s largest silicon foundry).
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May 18th UPDATE:
Huawei on Monday assailed the latest U.S. move to cut it off from semiconductor suppliers as a “pernicious” attack that will put the Chinese technology giant in “survival” mode and sow chaos in the global technology sector.
“The decision was arbitrary and pernicious and threatens to undermine the entire (technology) industry worldwide. This new rule will impact the expansion, maintenance, and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries,” Huawei said in a statement.
The ban also went against the US government’s claim that it is motivated by network security, the company said.
“The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust international companies place in US technology and supply chains. Ultimately, this will harm US interests,” said Huawei.
https://www.globaltimes.cn/content/1188683.shtml
References:
https://www.wsj.com/articles/u-s-moves-to-cut-off-chip-supplies-to-huawei-11589545335
https://abcnews.go.com/US/wireStory/china-warns-us-measures-huawei-rules-70728162
http://www.globaltimes.cn/content/1188491.shtml
U.S. government in talks with Intel, TSMC to develop chip ‘self-sufficiency’
The coronavirus pandemic has underscored longstanding concern by U.S. officials and executives about protecting global supply chains from disruption. Administration officials say they are particularly concerned about reliance on Taiwan, the self-governing island China claims as its own, and the home of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chip manufacturer and one of only three companies capable of making the fastest, most-cutting-edge chips (the two other foundries are Samsung and Intel).
Officials from the U.S. government are in talks with Intel and Taiwan Semiconductor Manufacturing to build chip factories in the U.S., the Wall Street Journal reported, citing sources familiar with the matter. The U.S. government believes the pandemic showed how reliant the U.S. is on Asian factories and it now wants to promote more tech self-sufficiency.
“The administration is committed to ensuring continued U.S. technological leadership,” a senior official said in a statement. “The U.S. government continues to coordinate with state, local and private-sector partners as well as our allies and partners abroad, to collaborate on research and development, manufacturing, supply-chain management, and workforce development opportunities.”
HiSilicon, owned by Huawei, is a fabless semiconductor company which doesn’t have its own manufacturing plant. It relies on foundry companies like Taiwan Semiconductor Manufacturing Co. to make its chips. The Trump administration is preparing rules that could restrict TSMC’s sales to HiSilicon. Huawei may be storing up chip inventories in anticipation of such tighter restrictions. Huawei may shift some of its orders to Chinese foundry Semiconductor Manufacturing International Corp. (SMIC), but technology there still lags behind industry leaders like TSMC and Samsung.
Ultimately SMIC’s capabilities could be hampered if the Trump administration decides to dial up the pressure in its campaign against China. The Commerce Department said last week that it would expand the list of U.S.-made products and technology shipped to China that need to be reviewed by national security experts before shipping. SMIC depends on foreign semiconductor manufacturing equipment, including some from the U.S.
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Intel VP of policy and tech affairs Greg Slater said Intel’s plan would be to operate a plant that could provide advanced chips securely for both the government and other customers. “We think it’s a good opportunity,” he added. “The timing is better and the demand for this is greater than it has been in the past, even from the commercial side.”
Intel Chief executive Bob Swan sent a letter to Defense Department officials on 28 April, saying the company was ready to build a commercial foundry in partnership with the Pentagon. Strengthening U.S. domestic production and ensuring technological leadership is “more important than ever, given the uncertainty created by the current geopolitical environment,” Swan wrote in the letter. “We currently think it is in the best interest of the U.S. and of Intel to explore how Intel could operate a commercial U.S. foundry to supply a broad range of microelectronics,” the letter said. The letter was then sent to Senate Armed Services Committee staffers, calling the proposal an “interesting and intriguing option” for a U.S. company to lead an “on-shore, commercial, state of the art” chip foundry.
TSMC has been in talks with people at the Commerce and Defense departments as well as with Apple, one of its largest customers, about building a chip factory in the U.S., other sources said. In a statement, TSMC said it is open to building an overseas plant and was evaluating all suitable locations, including the US. “But there is no concrete plan yet,” the company said.
Some U.S. officials are also interested in having Samsung, which already operates a chip factory in Austin, Texas, expand its contract-manufacturing operations in the U.S. to produce more advanced chips, more sources said.
A trainee at a facility of the U.S. chip maker GlobalFoundries in Germany last year. The U.S. is looking to strengthen its own production of semiconductors. PHOTO: SEBASTIAN KAHNERT/DPA/ZUMA PRESS
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Taiwan, China and South Korea “represent a triad of dependency for the entire US digital economy,” said a 2019 Pentagon report on national-security considerations regarding the supply chain for microelectronics. The US has dozens many semiconductor factories, but only Intel’s are capable of making the chips with transistors of 10 nanometers or smaller. The company however mostly produces for its own products. Among companies that make chips on contract for other companies, only TSMC and Samsung make those high-performing chips. Many US chip companies such as Qualcomm, Nvidia, Broadcom, Xilinkx and Advanced Micro Devices rely on TSMC for the manufacture of their most advanced products. Intel also makes chips with TSMC, according to TSMC’s 2019 annual report.
The Semiconductor Industry Association is conducting its own study on domestic chip production. The report is expected to recommend the US government set up a billion-dollar fund to push domestic chip investment, another source said. Another proposal by SEMI, an industry group representing semiconductor manufacturing equipment makers, involves giving tax credits to chip makers when they purchase and install equipment at factories in the US.
The Commerce Department is also considering a rule aimed at cutting off Huawei’s ability to manufacture chips at TSMC (see Addendum below). President Donald Trump has approved the move, but Commerce Department officials are still working through preliminary drafts, sources said.
May 16, 2020 Addendum: U.S. Moves to Cut Off Chip Supplies to Huawei
References:
Trump and FCC crack down on China telecoms; supply chain security at risk
Excerpt of a Wired article by Justin Sherman (edited by Alan J Weissberger):
The Trump administration is clearly and publicly upping its scrutiny of Chinese-incorporated telecoms. After Washington’s crusade against Huawei, and a forthcoming Senate report that allegedly blasts U,S. regulators for failing to properly oversee Chinese telecoms and their handling of data, these recent actions aren’t exactly surprising. But even if they’re genuinely focused on real national security risks, that doesn’t change the fact that President Trump’s administration doesn’t have a broader strategy.
What the FCC sent to the four companies are called Orders to Show Cause. These orders instruct a recipient firm to demonstrate that its continued operation in the United States doesn’t pose national security risks. Specifically, the ones issued here demand evidence from the four telecoms of why the FCC shouldn’t “initiate proceedings to revoke their authorizations” to operate in the U.S., under Section 214 of the Communications Act.
“The Show Cause Orders reflect our deep concern … about these companies’ vulnerability to the exploitation, influence, and control of the Chinese Communist Party, given that they are subsidiaries of Chinese state-owned entities,” said FCC chair Ajit Pai. “We simply cannot take a risk and hope for the best when it comes to the security of our networks,” he added.
The orders to China Telecom (Americas) Corporation, China Unicom (Americas) Operations Limited, Pacific Networks Corporation, and ComNet (USA) LLC gave the companies until May 24 to respond. Included in this answer must be a “detailed description” of the firm’s “corporate governance,” network diagrams describing how its systems are used, lists and copies of interconnection agreements with other carriers, and descriptions of the extent to which the firm “is or is not otherwise subject to the exploitation, influence, and control of the Chinese government”—neither a small request nor a mere formality.
Editor’s Note: China Mobile, the largest wireless telecom carrier in China is missing from the above list!
Pacific Networks (of which ComNet is a subsidiary) is owned by the state-owned CITIC Telecom International; the government connection here is almost as direct. Linking its board room to the CCP’s Zhongnanhai headquarters is certainly a bit clearer here than with Huawei, which isn’t outright state-owned but has nonetheless been subject to many questions, especially from the White House, about its Chinese government ties. Again, Beijing’s potential access to data from Pacific Networks Corporation is a legitimate risk.
The clock is ticking for these companies to respond to the U.S. government. China Telecom asked the FCC for a 30-day extension on the original May 24 deadline. Its lawyers got a reply this past week considering extra time, conditioned on specifying by May 11 which parts of the order they want clarified. Meanwhile, the executive branch is forging ahead—per the recently issued executive order—with formalizing a committee to scrutinize foreign telecoms’ presence in the US. Recommendations to the FCC could include modifying a company’s FCC license with “mitigation” measures or even outright revoking it.
Many issues plague the recent executive order. There is broad language about which kind of FCC licenses can be reviewed; the EO’s title would suggest only those of foreign telecoms, but it appears it could be much bigger. The EO also leaves many questions of implementation up to a memorandum of understanding, which is due several weeks from now.
After the order’s publication, multiple people I spoke with had additionally drawn attention to the future head of this newly called-for, yet-to-be-created committee: the attorney general. In different times, perhaps that’d be a reasonable way to balance represented interests, from the intelligence community to the Departments of Defense and Homeland Security. But these are not normal times—and William Barr is hardly known for his impartiality or respect for the rule of law.
Zooming out even further, the U.S. government lacks clear and objective criteria to define and articulate what makes one foreign telecommunications supplier more trustworthy than another. After all, post-Snowden, it’s a bit hard for the U.S. to beat the “other countries backdoor their systems” argument, sans evidence, without raising eyebrows. The Trump administration also continues throwing digital sovereignty policies in other countries—from onerous source code inspection requirements to limited data localization provisions—into the same “protectionist” bucket. Given this reality, how will these telecom reviews be diplomatically handled?
Even the recent FCC orders don’t get especially detailed. Beyond citing that the companies are state-owned or are controlled by those that are state-owned, the documents don’t elaborate much on why these firms cannot be trusted. So, is it more about ownership, corporate governance, and legal authorities in the country of incorporation than it is about technical security issues?
Or for the administration’s China hawks, is it the mere connection to Beijing? Because as the Trump administration and the president in particular continue China-bashing, spreading xenophobic rhetoric (e.g., around coronavirus’ origins), and preferring in general a zero-sum engagement with counterparts in Beijing, it seems more likely that factor overshadows all else.
There are real national security risks that must be weighed around foreign telecommunications companies. Questions of foreign state ownership should be explored, especially as the world becomes more digitally interconnected and the technological supply chain is a growing vector for hacking and exploitation. But foregoing a broader strategy on supply chain security is not an effective, long-term option for parsing these modern digital risks. Despite the recent China focus, these questions of supply chain policy go far beyond Chinese technology firms, and the U.S. government needs a comprehensive and repeatable process for answering them.
ZTE reports Q1 revenue & profit declines; boosts R&D; telemedicine diagnosis with hospitals to fight COVID-19
ZTE reported operating revenues for the first quarter were CNY 21.48 billion – down from 22.02 billion or -3.23% from the previous year. Net profit declined to CNY 780 million from 863 million or -9.58% year-over-year. ZTE’s net profit after extraordinary items rose 20.5% to CNY 160 million.
The company said the quarter was marked by the coronavirus pandemic and measures taken to alleviate the distress cause by it, as well as by the deployment of new infrastructures such as 5G and the Industrial Internet. ZTE’s R&D costs in the quarter increased to CNY 3.24 billion, comprising over 15.1% of revenues and up 1.2% from the year earlier.
ZTE CORPORATION –a joint stock limited company incorporated in the People’s Republic of China with limited liability. As at 31 March 2020 There were 483,643 shareholders in total (comprising 483,330 holders
of A shares and 313 holders of H shares).
Here are the shareholders holding 5% or above or top 10 shareholders:
- Zhongxingxin Telecom Company Limited
- HKSCC Nominees Limited
- Bank of China Limited
- Hong Kong Securities Clearing Company Ltd
- NSSF Portfolio #101
- Central Huijin Asset Management Co. Ltd
- Shenzhen Huitong Rongxin Investment Co. Ltd
- Nanjing Xinchuangxing Consulting and Management Partnership Ltd
- New China Life Insurance Company Ltd
- Shenzhen Investment Holding Capital Company Ltd
- Guangdong Hengjian Asset Management Company Ltd.
……………………………………………………………………………………………………………………………………………………………………………
ZTE continued to strengthen its R&D investment to build up its core competitiveness. For the three months ended 31 March 2020, the research and development costs amounted to RMB3.241 billion, 15.1% of operating revenue, increased by 1.2% compared to the same period last year.
During the first quarter of 2020, ZTE has placed great priority on its employee health and global customer services by promptly building and upgrading a remote office and customer service platform for all its employees. Moreover, the company has coordinated with partners to fight against COVID-19 and facilitate the resumption of production with digital means in an orderly manner. The company has been proactively promoting the new infrastructure-related services, and has managed to maintain the steady growth of its businesses during the review period.
Meanwhile, ZTE has been actively practicing social responsibilities. The company has collaborated with operators to guarantee the communication services of the front line against COVID-19. It has constructed 4G/5G networks and telemedicine diagnosis systems for hundreds of hospitals in China.
Teaming up with industry partners, ZTE has been committed to empowering various industries to fight against COVID-19 by leveraging its leading technological strength like 5G and AI. Specifically, ZTE has released 5G remote diagnosis and mobile diagnosis services, as well as the smart video cloud solution for epidemic prevention and control.
Moreover, the company has launched the family “cloud classroom” services to support online education. Featuring high efficiency and collaborativeness, ZTE’s secure remote office solution has enabled users of different industries to have remote office services during the outbreak of COVID-19, thereby facilitating the safe and rapid resumption of work and enhancing economic resilience.
With the acceleration of new infrastructures, such as 5G and the Industrial Internet, ZTE has been actively involved in the deployments of operators’ 5G infrastructure, and constantly scaled up its 5G production capacity. Meanwhile, the company has solidified cooperation with top industry players to promote the digital transformation of power, transportation, finance, government affairs and other key industries.
By the end of the first quarter of 2020, ZTE has consecutively secured significant shares for the 5G RAN, 5G SA core network, 5G transport centralized procurement of China Mobile, China Telecom and China Unicom. The company has constructed 5G demonstration networks in multiple cities in China, achieving Giga+ 5G continuous coverage experience. Moreover, the company has completed 5G commercial deployments in Europe, Asia-Pacific, the Middle East and other major 5G markets.
In addition, ZTE has sustained high growth in market shares in optical networks, as well as in the segments of Metro WDM and Backbone WDM. The company and its partners have jointly explored 86 application scenarios and carried out over 60 demonstration projects on a global scale, building a series of 5G intelligent manufacturing demonstration projects along with top industry players.
With respect to terminal devices, ZTE has unveiled its first 5G video smartphone ZTE Axon 11 5G. The company has continuously strengthened its 5G terminal devices cooperation with more than 30 operators worldwide. It has embarked on the 5G terminal market in Japan by partnering with operators.
Looking ahead , ZTE will pay close attention to the global epidemic situation, and make reasonable coordination accordingly with its global customers and partners to cope with the global epidemic. The company will strongly concentrate on its major businesses while leveraging the opportunities of new infrastructure construction, expecting to create more value for its telco customers.
References:
https://res-www.zte.com.cn/mediares/zte/Investor/20200424/E3.pdf
ZTE reports Q1 revenue & profit declines; boosts R&D; telemedicine diagnosis with hospitals to fight COVID-19
ZTE reported operating revenues for the first quarter were CNY 21.48 billion – down from 22.02 billion or -3.23% from the previous year. Net profit declined to CNY 780 million from 863 million or -9.58% year-over-year. ZTE’s net profit after extraordinary items rose 20.5% to CNY 160 million.
The company said the quarter was marked by the coronavirus pandemic and measures taken to alleviate the distress cause by it, as well as by the deployment of new infrastructures such as 5G and the Industrial Internet. ZTE’s R&D costs in the quarter increased to CNY 3.24 billion, comprising over 15.1% of revenues and up 1.2% from the year earlier.
ZTE CORPORATION –a joint stock limited company incorporated in the People’s Republic of China with limited liability. As at 31 March 2020 There were 483,643 shareholders in total (comprising 483,330 holders
of A shares and 313 holders of H shares).
Here are the shareholders holding 5% or above or top 10 shareholders:
- Zhongxingxin Telecom Company Limited
- HKSCC Nominees Limited
- Bank of China Limited
- Hong Kong Securities Clearing Company Ltd
- NSSF Portfolio #101
- Central Huijin Asset Management Co. Ltd
- Shenzhen Huitong Rongxin Investment Co. Ltd
- Nanjing Xinchuangxing Consulting and Management Partnership Ltd
- New China Life Insurance Company Ltd
- Shenzhen Investment Holding Capital Company Ltd
- Guangdong Hengjian Asset Management Company Ltd.
……………………………………………………………………………………………………………………………………………………………………………
ZTE continued to strengthen its R&D investment to build up its core competitiveness. For the three months ended 31 March 2020, the research and development costs amounted to RMB3.241 billion, 15.1% of operating revenue, increased by 1.2% compared to the same period last year.
During the first quarter of 2020, ZTE has placed great priority on its employee health and global customer services by promptly building and upgrading a remote office and customer service platform for all its employees. Moreover, the company has coordinated with partners to fight against COVID-19 and facilitate the resumption of production with digital means in an orderly manner. The company has been proactively promoting the new infrastructure-related services, and has managed to maintain the steady growth of its businesses during the review period.
Meanwhile, ZTE has been actively practicing social responsibilities. The company has collaborated with operators to guarantee the communication services of the front line against COVID-19. It has constructed 4G/5G networks and telemedicine diagnosis systems for hundreds of hospitals in China.
Teaming up with industry partners, ZTE has been committed to empowering various industries to fight against COVID-19 by leveraging its leading technological strength like 5G and AI. Specifically, ZTE has released 5G remote diagnosis and mobile diagnosis services, as well as the smart video cloud solution for epidemic prevention and control.
Moreover, the company has launched the family “cloud classroom” services to support online education. Featuring high efficiency and collaborativeness, ZTE’s secure remote office solution has enabled users of different industries to have remote office services during the outbreak of COVID-19, thereby facilitating the safe and rapid resumption of work and enhancing economic resilience.
With the acceleration of new infrastructures, such as 5G and the Industrial Internet, ZTE has been actively involved in the deployments of operators’ 5G infrastructure, and constantly scaled up its 5G production capacity. Meanwhile, the company has solidified cooperation with top industry players to promote the digital transformation of power, transportation, finance, government affairs and other key industries.
By the end of the first quarter of 2020, ZTE has consecutively secured significant shares for the 5G RAN, 5G SA core network, 5G transport centralized procurement of China Mobile, China Telecom and China Unicom. The company has constructed 5G demonstration networks in multiple cities in China, achieving Giga+ 5G continuous coverage experience. Moreover, the company has completed 5G commercial deployments in Europe, Asia-Pacific, the Middle East and other major 5G markets.
In addition, ZTE has sustained high growth in market shares in optical networks, as well as in the segments of Metro WDM and Backbone WDM. The company and its partners have jointly explored 86 application scenarios and carried out over 60 demonstration projects on a global scale, building a series of 5G intelligent manufacturing demonstration projects along with top industry players.
With respect to terminal devices, ZTE has unveiled its first 5G video smartphone ZTE Axon 11 5G. The company has continuously strengthened its 5G terminal devices cooperation with more than 30 operators worldwide. It has embarked on the 5G terminal market in Japan by partnering with operators.
Looking ahead , ZTE will pay close attention to the global epidemic situation, and make reasonable coordination accordingly with its global customers and partners to cope with the global epidemic. The company will strongly concentrate on its major businesses while leveraging the opportunities of new infrastructure construction, expecting to create more value for its telco customers.
References:
https://res-www.zte.com.cn/mediares/zte/Investor/20200424/E3.pdf
Huawei’s “resilient” Q1-2020 results and coronavirus commentary
Undaunted by the U.S. campaign to ban its network equipment and smart phones, Huawei reported results for the first quarter 2020 that were in line with expectations, despite the effects of the coronavirus pandemic. The company said its business is continuing to grow, albeit at a slower pace.
Revenue in the first quarter rose by about 1% to 182.2 billion yuan ($25.72 billion), vemart phones, China tech giant rsus a 39% growth posted a year ago. Its net profit margin over the period narrowed to 7.3% from about 8% a year ago. Huawei being a privately owned company did not disclose its net profits.
“The growth rate has slowed, but this is also a resilient performance in the face of both the entity list and the coronavirus we are facing at this moment,” Vice President Victor Zhang said in a statement on Tuesday.
This represents a significant slowdown from the 19 percent sales growth for 2019. The company earlier stated that 2020 would be a very difficult year, its first full year with U.S. sanctions. Along with the effects of the coronavirus outbreak, 2020 “will be the most difficult year” for Huawei, rotating chairman Eric Xu said.
As for the impact from the coronavirus pandemic, Zhang said it was difficult to gauge what that would be in the short or long term, as he presented the results from London rather than Huawei’s Shenzen base to mark 20 years of business in Europe.
The company provided enlightening comments on the coronavirus in its earlier referenced statement:
Networks are a lifeline for people from all walks of life during this public health crisis, so ensuring normal network operations is of paramount importance. Huawei is doing everything in its capabilities to help carriers ensure stable and secure network operations. Together, we are working to meet the network demand created by social distancing as people switch to telecommuting, distance education, and e-commerce for daily necessities.
Since the outbreak, Huawei and its partners have rapidly launched many 5G- and AI-powered medical applications. We are using our expertise in communications technologies to help fight the pandemic and save more lives. The AI-assisted coronavirus diagnosis solution cuts CT scan review times from 12 minutes down to 2, helping doctors improve their diagnostic efficiency. 5G-enabled remote video consultation helps mitigate shortages of frontline experts and increases the efficiency of diagnosis and treatment of critical patients. AI-powered thermal imaging devices can take temperatures, increasing the efficiency of infection prevention and control in public places. In addition, Huawei has been doing its best to get masks, test kits, and other protective supplies to the countries and organizations that need them.
A seed that survives the storm will sprout and then blossom. Even though it is impossible to know when the tides of this pandemic will turn, we at Huawei believe that this challenge will be overcome by standing together.
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In March, Huawei reported financial results for 2019, recording a $12 billion revenue shortfall that it attributed to the entity listing, which effectively blacklisted Huawei and numerous affiliates by restricting sales of certain products from U.S. suppliers to the vendor.
Huawei’s consumer segment was particularly hit by the U.S restrictions in the second half of last year. As one of the world’s largest smartphone makers, Huawei was unable to access Google’s proprietary Android operating system and was forced to launch new devices without access to the popular Google Play store.
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References:
https://www.huawei.com/en/press-events/news/2020/4/huawei-announces-q1-2020-business-results
China Mobile says COVID-19 effected Q1 2020 Results: Loss of 4M 4G subs, 31.7M 5G subs
China Mobile’s first quarter 2020 earnings report was somewhat disappointing, save for 5G. Revenues, earnings and profits all decreased for the first quarter as the world’s largest mobile operator felt the impact of the coronavirus outbreak in China.
The state owned telco lost 4 million customers which is < 1/2% of their customer base in the first quarter. There were 946 million total China Mobile subscribers at the end of March 2020.
Revenues fell 2%, to 181.3 billion Chinese yuan (US$25.6 billion), compared with the year-earlier period, while revenue from telecommunications services was RMB168.9 billion, up by 1.8% over the same period last year. Profit attributable to equity shareholders was RMB23.5 billion ($3.3 billion), down by 0.8% over the same period last year.
The company (referred to as “the Group”) addressed the impact of COVID-19 in their Q1 2020 earnings report:
COVID-19 posed an impact on the overall society and economy in the first quarter of 2020. The Group’s business development was no exception. In light of COVID-19, the Group has introduced “three safeguards” which endeavoured to provide reliable communications, maintain service continuity and step up comprehensive prevention and control measures. Leveraging the demand for informatization services brought about by measures to prevent and control COVID-19 and the resumption of work and production, the Group has also accelerated business transformation and upgrade.
The Group’s total number of mobile customers was around 946 million as at 31 March 2020. Among them, the numbers of 4G customers and 5G package customers were 752 million and 31.72 million, respectively. During the first quarter of the year, data traffic business maintained growth momentum with handset data traffic recording a year-on-year increase of 43.4% and handset data DOU (average handset data traffic per user per month) reaching 8.3GB. Total voice usage declined by 16.3% year on-year to 661.4 billion minutes, which was attributable to OTT substitution and COVID-19.
Buoyed by the rapid growth of corporate SMS, total SMS usage rose by 45.4% year-on-year. Mobile ARPU dropped by 6.7% year-on-year to RMB46.9 for the first quarter of the year and the decline rate has moderated compared to that of the previous year. As at 31 March 2020, the total number of wireline broadband customers was 191 million, with a net increase of 4.10 million for the first quarter of the year. Wireline broadband ARPU amounted to RMB31.3.
Amidst COVID-19, the Group’s telecommunications services revenue grew by 1.8% year on-year to RMB168.9 billion for the first quarter of 2020. Currently, measures to prevent and control COVID-19 are still underway and some impact may carry over.
The Group will continue to foster business transformation and upgrade and make an all-out effort to promote the coordinated development of the CHBN four major markets. It will also continue to optimize its revenue structure and strive to maintain growth in telecommunications services revenue for the full-year of 2020. The Group’s revenue from the sales of products and others went down by 34.9% year-on year to RMB12.4 billion for the first quarter of the year. The decline was mainly caused by contracted sales of handsets and IoT devices, amongst other products, due to COVID-19.
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The figures seem to vindicate arguments that China Mobile will prove fairly resilient to COVID-19 as a critical lifeline to the wider world for people under lockdown/ shelter in place orders. While customer numbers fell in mobile, there was no decline at China Mobile’s fixed-line business, which picked up another 4 million broadband customers to finish March with 191 million in total. On the mobile side, usage of traditional voice services fell from 278 minutes per user each month in the final quarter of 2019 to just 234 minutes in the first quarter of 2020. Mobile data usage, though, rose from 7.1 to 8.3 gigabytes per month over the same period.
Largely due to China government incentives, China Mobile now claims nearly 32 million 5G customers, up from just 2.6 million in December 2019. Sustain that rate of growth and the operator would be on course for almost 120 million 5G customers by the end of this year. That may be difficult once China Mobile has attracted all the early 5G adopters. It will be interesting to see how soon the major improvements brought by 3GPP Release 16 (scheduled to be frozen in early July 2020) will be implemented by the Group’s network equipment vendors- principally Huawei and ZTE.
Key Insights From Bloomberg:
- The carrier, which has more than 940 million subscribers, may benefit in the months ahead as economic activity begins to return toward normal. The expansion of 5G coverage planned this year may also help lure subscribers to higher priced heavy-data plans.
- While the company is spending to expand 5G networks, it has also been maintaining dividend levels and had cash and bank deposits of about 317 billion yuan as of the end of last year.
- Attracting 5G subscribers is a key for growth as those users tend to spend more per month. The company had about 31.7 million 5G subscribers as of the end of March.
- While total subscribers fell in the first quarter, the carrier benefited from a slight rise in average revenue per user from the previous quarter as the introduction of 5G networks made it easier for users to play richer video games and use applications that consume more data.
Iian Morris, International Editor at Lightreading wrote in a blog post:
A challenge for the Group is to meet the investments required for 5G infrastructure. China Mobile has earmarked RMB100 billion ($14.1 billion) for capital expenditure on 5G in 2020, an increase of 317% on what it spent in 2019, according to market-research firm Omdia (owned by market research goliath Informa). Its plan is to add at least 250,000 5G base stations by the end of this year.
Meeting this commitment will be difficult as earnings and cash flow are squeezed by COVID-19. Just-published figures show that earnings before interest, tax, depreciation and amortization fell nearly 6% in the first quarter, to RMB68.5 billion ($9.7 billion), compared with the year-earlier period. Under government pressure to hit deployment targets, China Mobile may look to reduce costs in other parts of the business to offset the increase in spending on 5G. “The group will continue to develop new sources of revenue and identify ways to curtail expenses, while taking measures to reduce costs and enhance efficiency,” it says in its statement.
Hacking into headcount will be difficult if China Mobile is to avoid disruption to 5G buildout and sales and marketing activities. Nevertheless, the operator may be able to realize some cost savings through pruning of a workforce that numbered as many as 456,239 employees at the end of last year. While major US operators have slashed tens of thousands of roles in recent years, China Mobile seems to have been a lot more cautious on the jobs side: Its staff numbers have fallen less than 1% since the end of 2016.
The latest update on 5G will be a further concern for US officials already worried about falling behind China in the development and rollout of the new network technology. With at least 30 million 5G customers, China already has enough users of the service to spur the development of new commercial applications that might not be feasible in the old 4G world. That is exactly what the US does not want to hear.
References: