5G brings once a decade opportunity
China-US relations threaten splinternet of things
Faster speed, lower latency herald industry upheaval
The world’s attention is rightly on the deaths and suffering from Covid-19 but away from the headlines there are some big issues emerging in how innovation will help or impact the world across a number of technologies. One of the biggest is the fifth generation (5G) of telecoms network equipment.
Given tensions in China-US trade relations, 5G has become a pivotal battle in which country’s companies lead on its development and standards.
The US is encouraging its key partners to reject 5G equipment made by China-based Huawei. As the Economist warned in its annual outlook edition, The World in 2020: “The transformative potential of 5G will be diminished by America’s blacklisting of Huawei.”
Huawei has spent $46bn developing kit and expects to deploy 1.5 million base stations across hundreds of Chinese cities by the end of 2020, the Economist said. It has been keen to sell its technology around the world, with the UK agreeing some of it can be used in national infrastructure, albeit not “sensitive” areas, despite American pressure.
By trying to force countries to avoid Chinese technology, the US risks a “splinternet of things” and a return to the 1990s difference in standards between the US and Europe for 2G mobile phones. (The “generation” terminology only became widely used when 3G was launched but is used retroactively, such as 1G for the 1980s and 2G for the 1990s.) The last major network upgrade, 4G, took place in 2009 when devices reached a peak speed of nearly 10 Mbps. This pales in comparison with what 5G is set to deliver – speeds of between 10 and 20 Gbps. This would drive network latency from 30ms to about 1ms, making it appropriate for a wide range of services and devices that require ultra-low latency.
Above: Dave Flanagan (right) and Chris Bartlett (centre) listen to Alex Villela discuss 5G at the GCVI Summit
Vincent Peng, a board member at Huawei, which has about 15% of the world’s patents in 5G, warned this could result in a disastrous “digital Berlin Wall” where there is no global interoperability.
One-third of the expected 1.2 billion 5G users by 2025 will be in China, according to the GSMA Association.
Without common global standards, the internet of things will struggle to prove its worth connecting sensors and hence businesses, machines and factories rather than just people.
Gartner, a research group, said the global number of devices embedded with sensors would reach 20.4 billion this year, up from 8.4 billion in 2017. But lack of commonality might slow global 5G market growth rates, which had been projected to reach $277bn by 2025 at a compound annual growth rate of 111% from 2019 to 2025, according to ResearchAndMarkets.com.
Corporate venturers (CVCs) in the US, however, played down the risks of such a splinternet at the Global Corporate Venturing and Innovation (GCVI) Summit at the end of January.
At the GCVI Summit, Chris Bartlett, head of Verizon Ventures, a CVC arm of telecoms operator Verizon, which has reshaped itself around the launch of 5G, and Alex Villela, a managing director for Qualcomm Ventures, were interviewed by Dave Flanagan, senior managing director of Intel Capital, the corporate venturing division of chipmaker Intel, on the development of 5G technology.
Bartlett said the impact of 5G would be larger than previously believed but would also take longer to develop than expected. Verizon is already building a network to help devices and networks to connect, he said.
Bartlett predicted 5G would start gaining traction in 2021 and the following year would be even more important for the technology. Verizon Ventures was investing in companies with foundation tech for 5G, as it was a strategic topic for many chief executives and chief innovation officers across the telecoms industry.
The sharing economy was born against a backdrop of 4G and Villela said 5G would enable other types of opportunities, leveraging AI to facilitate the connection between smart devices.
Villela gave the example of games, as consumers could have a richer experience through immersive reality. His unit launched a $200m vehicle, Qualcomm Ventures 5G Ecosystem Fund in October 2019.
Bartlett agreed and said the focus would shift from virtual to augmented reality thanks to 5G technology.
Verizon Ventures’ investment activities could be a proxy, allowing more efficient connections, initially in the industrial sector, but increasingly more on the enterprise and supply chain sides. He added: “5G would enable industrial internet of things, real-time analytics and faster decision-making.”
Data centres could be brought into the telecoms world, according to Villela, who mentioned the 5G application layer being developed by wearable tablet producer RealWear, Qualcomm Ventures’ portfolio company.
Microsoft acquired Qualcomm Ventures-backed Affirmed Networks for a reported $1.35bn in March to bring 5G technology into its Azure cloud platform.
Microsoft already serves telecoms customers and struck an agreement with provider AT&T last year with the aim of moving more the carrier’s network to its cloud platform. ZDNet reported demand for Azure is up 775% thanks to the due to crisis and more people working from home.
For Qualcomm, it is timely validation for its 5G investment strategy having said in October it would invest up to $200m in 5G-related technology developers through the new fund.
Quinn Li, managing partner at Qualcomm Ventures, said: “We expect 5G to fuel a new era of innovation and have a significantly greater impact than any previous generation of cellular network. 5G will make it possible for everything to communicate and interact seamlessly, which will transform industries like auto, manufacturing, compute and healthcare. With this in mind, we launched a first-of-its kind, global 5G Ecosystem fund in October 2019.
“The fund will invest up to $200m in startups developing innovative solutions across the entire 5G value chain with the goal of helping to accelerate 5G innovation beyond the smartphone and drive 5G adoption. Our objective is to pursue a 5G ecosystem on a global basis – Qualcomm Ventures has a local presence in six geographies (US, Latin America, Israel, Europe, China and India) and leverages its global presence to spot best-of-breed, disruptive innovation across the globe, which we will apply for this fund.
“The 5G Global Ecosystem Fund builds on Qualcomm’s cutting-edge 5G research and its heritage of inventing breakthrough technologies. This also uniquely positions Qualcomm Ventures with a deep understanding of the technologies that are essential for 5G along with a truly global network that startups can leverage to scale their businesses.”
Carlos Kokron, managing director at Qualcomm Ventures, added: “[In 2019] the first 5G networks were launched and there are now over 100 smartphone models available.
“2020 is the year of 5G – networks are being built around the globe and we will see millions of subscribers. We are excited about the impact it will bring to the world and are actively pursuing investment opportunities spanning new use cases (consumer and enterprise) and infrastructure buildout.”
On infrastructure deals, US-based phone spectrum-sharing technology producer Federated Wireless secured $51m in a series C round that included telecoms mast operators SBA Communications and American Tower.
Above: Data centres could be brought into the telecoms world
Founded in 2012 by Allied Minds to exploit Virginia Tech research, Federated Wireless markets shared-spectrum technology that allows mobile network operators, governments and private enterprises to harness its telecoms band without impairing service quality.
While Qualcomm, Verizon and other western companies, such as Nokia, Ericsson and Siemens, are leading the build out of 5G infrastructure and its supporting ecosystem, similar efforts are being made in China through VC.
Switzerland-based satellite communications equipment supplier Swissto12 has completed a SFr18.1m ($18.7m) round co-led by subsidiaries of telecommunications firm Swisscom, financial services firm Zürcher Kantonalbank and industrial conglomerate Constantia Industries.
Founded in 2011, Swissto12 uses 3D printing technology to manufacture onboard components for compact satellites – called smallsats – that can help in 5G. The bankruptcy of smalls developer OneWeb after it had raised more than $3bn has surprised the market and left the way open to SpaceX’s Starlink and other providers looking for universal internet coverage.
China-based satellite technology producer Galaxy Space, for example, has raised an undisclosed amount of funding to build a low-orbit satellite constellation for commercial use, specifically in the provision of 5G broadband service from investors including Legend Capital, the VC firm founded by conglomerate Legend Holdings, JIC Technology Investment, a subsidiary of state-owned investment group China Jianyin, and Shunwei Capital, IDG Capital and Morningside Venture Capital.
Similar to Qualcomm’s 5G fund, China-based investment firm Winreal Investment has reached the first close of a Rongteng 5G Industry Fund at RMB1bn ($146m) from investors including government-backed funds, SAIC Capital, the corporate venturing arm of Chinese state-owned automaker SAIC Motor, furniture firm Sunon Group, video-centric services provider Dahua Technology, Shenzhen-listed optical communication devices ZhongJi InnoLight, and Zhebao Media, which specialises in building internet news and digital entertainment platforms, among others.
Established in June 2015, Winreal’s portfolio companies include China-based big data provider MiningLamp, which raised $300m last month, third-party advertising technology developer Miaozhen Systems, semiconductor firm Lante Optics, and child coding education brand Xiaomawang.
Jixun Foo, managing partner at VC firm GGV Capital, told the South China Morning Post (SCMP) that funding would shift over the next three years from AI, robotics and data science to 5G, with investment opportunities in Southeast Asia including insurance, education, travel, healthcare and logistics.
He said the shift from 3G to 4G reshaped the face of entertainment by making live streaming and short-form video apps possible, as the costs of production were reduced.
“Technology reduces friction,” Foo told SCMP. “With 5G, the reduction in latency will drive everything from [augmented and virtual reality], smart buildings, smart cities and autonomous vehicles.”
With a future this promising, the desire to control it from an infrastructure and standards point of view will come up against the market-driven forces searching to find what works at consumer and enterprise level in the different countries.
