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Ongoing tensions with the US unlikely to hinder Chinese 5G: Credit Suisse – CNBC

Ongoing tensions with the US unlikely to hinder Chinese 5G: Credit Suisse – CNBC

Ongoing tensions between the U.S. and China are unlikely to hinder the world’s second-largest economy from moving ahead quickly with 5G mobile networks in its domestic market, an analyst told CNBC.

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The fifth generation (hence the 5G name) of mobile networks aims to provide faster data speeds and more bandwidth to carry ever-growing levels of web traffic. And the race to develop that technology has been heated because victory would allow companies to influence global standards.

Last week, Reuters reported that U.S. President Donald Trump was looking to impose tariffs on up to $60 billion of Chinese imports and would target the technology and telecommunications sectors. That followed the U.S. government’s decision to block Singapore-based Broadcom’s proposed buyout of U.S.-based Qualcomm — a decision which was said to have been influenced by the threat of Chinese 5G efforts.

“Deals for overseas have already been blocked, but I don’t think that stops the domestic Chinese market from being huge and moving ahead really quite quickly with 5G — probably in the second half of next year,” said Colin McCallum, head of Asia telecommunications research at Credit Suisse.

He explained that the plans would be for local Chinese companies to build up experience and then “try to export that expertise and sell overseas.”

“What the trade relationships might be like in a year-and-a-half’s time, two years’ time, we’ll just have to wait and see,” McCallum told CNBC at the Credit Suisse Asian Investment Conference in Hong Kong.

He added that overseas mergers-and-acquisitions-type transactions would be “quite unlikely to happen in the near-term, for sure. But that shouldn’t stop exporting.”

The race to roll out 5G is on in the United States, China and other parts of Asia. Last year, the first specification for the technology was completed, which was considered a huge step toward commercialization. Some of the technology’s capabilities were demonstrated at the Winter Olympics in Pyeongchang, South Korea, in February.

Beijing has been pushing the development of its 5G industry, favoring domestic names like Huawei and ZTE — both make equipment necessary for the technology to work.

According to McCallum, China’s large domestic market of 1 billion fourth-generation (4G) users gives it a “very good head start for building critical mass.”

He said he expects the first commercial wave of the technology to happen in 2019 at the earliest. Countries like China, Australia, South Korea and Japan would be the first within the Asia Pacific region to go ahead with 5G, according to McCallum.

“Interestingly, other operators around the region are really quite content with 4G,” he said. “It’s brought video to everybody, to over a billion people in China (and) the cost of rolling out 4G is very, very low, relatively to 3G — 4G, I think, will end up being an elongated phase in quite a few markets.”

Countries like Thailand and Indonesia might not roll out 5G until maybe 2021, he said.

— CNBC’s Arjun Kharpal contributed to this report.

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