I find it amazing how quickly conventional wisdom about new technology can harden. It is commonly assumed today that 5G, the fifth generation mobile technology that has yet to become a large scale commercial reality, will be dominated by China.
Proponents argue that China is moving ahead quickly to build out the necessary infrastructure, while the US and particularly Europe lag behind. China’s homegrown telecoms company Huawei is busy making deals in multiple countries, while the US chip champion, Qualcomm, has been bogged down in a multiyear, multi-continent legal battle with Apple, which came to an end last week.
Finally, many believe that it will be easier for a surveillance state such as Beijing to own and harness the data that will be transferred via the 5G chips that will exist in all sorts of products from tires, to tennis shoes, to foetal heart monitors. The key idea behind this thinking is that we’ve left the “innovation” stage of artificial intelligence use, and the only thing that matters is the data.
I challenge this entire premise. Let’s start with the chip wars. Qualcomm, the pre-eminent American innovator in 5G, outspends its domestic peers on innovation, pouring a whopping 25 per cent of revenue into research and development. That focus was cited by the Committee on Foreign Investment in the US last year when they pushed back against efforts by Broadcom to push through a hostile takeover of the chipmaker. (Qualcomm supporters argued that the US shouldn’t permit a foreign company to acquire a world-beating innovator in a key technology area.)
The tri-continental battle with Apple over the appropriate licensing fee for Qualcomm’s chips really did hurt the company: licensing revenues plunged by $2.5bn during the fight.
But now the two sides have settled and dropped all litigation. Apple gets access to Qualcomm’s patents, but the chipmaker is the bigger winner. Not surprisingly, its share price has soared, and management expects profits to return to roughly pre-dispute levels.
The deal also means that the world’s most successful smartphone maker and the first company to launch a 5G chip set — both American — can get on with the business of rolling out next generation services. Their return to business as usual will also make it more attractive for Europeans to buy their 5G chips from Qualcomm rather than Huawei, which oddly has yet to make a deal in mainland China. Not only is the US company’s future no longer in doubt, but the Chinese provider has faced sustained criticism from the administration of President Donald Trump in the US, which argues that the use of Huawei equipment threatens American and European security.
Secondly, China has been stacking the international telecom standards bodies with their own representatives over the past few years, and they have a head start on 5G network construction. But that does not equate to a lasting technological advantage. China was late to adopt 3G, but that did not stop their progress in 4G, for example. There is no reason to think that the US, or even Europe, cannot catch up in 5G.
The Chinese government does have the advantage of being able to direct state-owned operators to build infrastructure, and its companies don’t have to purchase spectrum before offering 5G services. Yet the first country to have an operational 5G network will not be China, but South Korea.
It’s important which countries build their networks first, but it’s not the only factor in success. The real advantages of 5G are going to come from the way in which individual companies and industries exploit the potential gains from mining all the data 5G will allow them to collect. Right now, it is impossible to say exactly where those advantages will come from. “Just as no one predicted that one of the major uses of 4G would be a new way of calling taxis, the most important uses for 5G technology are also difficult to predict before it’s actually available,” Dan Wang, an analyst for Gavekal Dragonomics, wrote recently.
Just consider the magnitude of the information that is going to be generated by 5G. According to IDC, more than 5bn consumers globally interact with data every day and, by 2025, that number will be 6bn, or 75 per cent of the world’s population. In 2025, each connected person will have at least one data interaction every 18 seconds, it predicts. Many of these interactions will come via the “internet of things”, those 5G chips in everything from vending machines to medical devices.
It is hard for me to believe, given that amount of change, and the variety of industries and companies involved, that we have left the innovation phase of AI. When has innovation ever stopped? Even the most expert prognosticators rarely get technological evolution completely right.
Consider how the industrial revolution developed: the big things came first, like electricity and the combustion engine. But they were followed by spates of innovative products and services, ranging from automobiles and domestic appliances to wind turbines. There is no reason to think this time will be different — or that China, the US, and Europe can’t all have a piece of the pie. The battle for 5G isn’t set — and it doesn’t have to be a zero-sum game.