As we all know, in 2019, China Mobile invested 24 billion yuan to build a standard conversion of 50,000 5G base stations. Currently, the cost of building a 5G base station is about 480,000 yuan. This means that in 2020, the investment scale of the entire Chinese operating market in 5G main equipment will be as high as 260 billion to 290 billion yuan. Under the national strategy of “new infrastructure”, China is bringing huge opportunities to the global communication equipment market and will profoundly affect its competitive landscape.
A reporter from China Business News noted that China Mobile has issued a military order to build 300,000 5G base stations by the end of 2020, and China Telecom and China Unicom have also announced that they will build and share 250,000 5G base stations in 2020. If you add China Radio and Television, which will start 5G-scale network construction in 2020, the industry expects that China will invest in at least 550,000 to 600,000 5G base stations in 2020.
According to data from the Ministry of Industry and Information Technology, by the end of 2019, China had built more than 130,000 5G base stations. Based on this, it can be speculated that by the end of 2020, about 700,000 5G base stations will be built in China. Huawei’s recent forecast also shows that the global 5G base station will increase from 500,000 at the end of 2019 to 1.5 million by the end of 2020, of which China will account for more than 50% of the global 5G base station construction this year. This shows the importance of the Chinese market to communication equipment manufacturers.
Market pattern emerges
With the issuance of 5G licenses by the Ministry of Industry and Information Technology to China Mobile, China Telecom, China Unicom, and China Radio and Television on June 6, 2019, China’s 5G starting gun has been fired. Taking this as the dividing line, the construction of 5G trial commercial networks by Chinese operators in the first half of 2019 and the construction of 5G networks in the second half of 2019 have brought great changes to the competitive landscape of communication equipment manufacturers in the Chinese market.
A person from a provincial-level operator in Central China told reporters that 5G network construction can be roughly divided into three parts: core network, access network, and bearer network. Among them, the core network plays the role of the brain in 5G operators, and the access network is quite For the limbs, the carrying net can be regarded as the nervous system. Taking China Mobile as an example, since the beginning of 2019, several centralized procurements have been carried out, which have involved all aspects of 5G core network, access network, and bearer network. From the bidding results, the competition pattern of China’s 5G communication equipment market can be outlined.
In early February 2019, China Mobile announced the “2019 5G Large-scale Network Construction and Application Demonstration Project Wireless Main Equipment Leasing Single-Source Procurement Results”, showing that a total of 500 5G base stations were purchased this time, and a total of 5 manufacturers won the bid, of which Huawei won the bid for 250 station, accounting for 50%, Ericsson won the bid for 110 stations, accounting for 22%, ZTE won the bid for 80 stations, accounting for 16%, Nokia and Datang Telecom each won the bid for 30 stations, accounting for 6%.
On the day of obtaining the 5G license on June 6, 2019, China Mobile couldn’t wait to announce the “Single-source procurement information for centralized procurement of equipment for upgrading and transforming core network 5G NSA functions in 2019”. The first round of formal bidding.
This round of procurement is actually divided into three parts: the core network upgrade to 5G, the (access network) 5G first-phase wireless project, and the 5G terminal (beta). Among them, Huawei, Ericsson, Nokia and ZTE won the bids for 219 sets, 153 sets, 56 sets and 22 sets of MME equipment, and 369, 231, 60, 369, 231, 60, 21 sets of SAE-GW equipment. However, the aforementioned operator reminded reporters that the core network part of this round of bidding is mainly the upgrade and transformation of the equipment of the original manufacturer in China Mobile’s 4G core network, that is, which manufacturer the original 4G core network equipment belongs to, and which manufacturer is still responsible for this round of upgrades advance.
In this round of 5G terminal (beta) bidding, a total of 10,100 5G mobile phones were purchased, including 5,000 Huawei Mate 20 X, accounting for 49.5%, 2,000 ZTE A10 Pro, accounting for 19.8%, and 2,000 Xiaomi MIX 3, accounting for 19.8%. 19.8%, 1000 units of OPPO Reno, accounting for 9.90%, 100 units of vivo Nex, accounting for 0.99%. 7,000 5G CPEs were also purchased, with Huawei and ZTE accounting for 71.43% and 28.57% respectively.
China Mobile did not announce the details of the winning bid for the (access network) Phase I 5G wireless project with the highest value (about 19.2 billion yuan) in this round of bidding.
By December 2019, China Mobile launched another SPN (Slice Packet Network) 5G bearer network bidding involving 26 provinces. The results of this round of bidding involving about 10 billion yuan were announced on March 10, 2020. Among them, Huawei, Fiberhome and ZTE’s bid-winning shares were 54.81%, 32.50%, and 12.69%, respectively.
In response to the most valuable part of the access network main equipment in the entire China 5G bidding in 2019, the aforementioned operator told reporters that in general, China Mobile, China Telecom, and China Unicom will build about 50,000, 40,000, and 40,000 respectively in 2019. Base stations, among the 130,000 base stations, Huawei accounts for about 50%, Ericsson and Nokia together account for about 25%, ZTE accounts for about 20%, and Datang Telecom accounts for about 5%.
ZTE may be the biggest beneficiary
Judging from the distribution of domestic 5G bidding shares in 2019, Huawei is undoubtedly the biggest winner. ZTE may have missed expectations, because in the past, ZTE’s domestic market share was close to 25%, and the industry generally believes that ZTE’s domestic 5G market share should be between 20% and 30%, which shows that ZTE still has room for improvement in China. Overseas players such as Ericsson and Nokia have further squeezed their share in China.
At present, China Mobile has started the centralized procurement of the main equipment for the second phase of the 5G wireless access network in 2020, involving a total of 28 provinces, autonomous regions and municipalities directly under the Central Government. The total demand exceeds 230,000 5G base stations, and the total tender amount is as high as 46 billion yuan. China Mobile’s goal is to ensure that the number of 5G base stations reaches 300,000 by the end of 2020. China Telecom and China Unicom also recently announced the “2020 5G SA New Construction Wireless Main Equipment Project Centralized Prequalification Announcement” with an estimated scale of 250,000 base stations. The goal of both parties is to jointly complete the construction of 250,000 5G base stations by the end of September 2020, and strive to complete the construction target of 300,000 5G base stations by the end of the year.
Industry insiders pointed out that the total procurement plan of the three major operators in this round is close to 500,000 5G base stations. The procurement amount of the base station part in this round will exceed 100 billion yuan, which will have a great impact on the global communication equipment market.
From the perspective of public bidding, China Mobile has set up 2~4 bidders in 28 provinces and municipalities this time. Among them, only 1 province has set up 4 bidders, 5 provinces have set up 2 bidders, and the rest of the provinces have set up 2 bidders. 3 winning bidders were set.
China Mobile has also roughly divided the corresponding share of winning bidders. The share of the largest winning bidder is set between 50% and 70%, and it is set at 50% to 60% to occupy the majority. The share of the second largest bidder is set at 25%~40%, with 25%~30% occupying the majority. The share of the third winning bidder is set at 10%~20%, with 15% occupying the majority. Only Hubei Mobile has set 4 winning bidders, and the share of the fourth winning bidder is set at 5%.
In the opinion of industry insiders, domestic operators have always used a strategy of three or so for the main equipment bidding, which not only prevents one equipment manufacturer from becoming dominant, but also avoids the later operation and maintenance pressure that may be caused by too many suppliers. The person further analyzed that most of China Mobile’s provinces in this round of bidding basically continued the previous strategy and adopted a “2+1” bidding model, that is, two or so domestic manufacturers plus one overseas manufacturer.
An industry analyst from Industrial Securities believes that domestic 5G main equipment providers are mainly Huawei, ZTE and Datang Telecom, with an overall share of 70% to 80%, of which Datang Telecom has a smaller share, which should be around 5%. The share of two overseas equipment manufacturers Ericsson and Nokia should be around 20%.
The analyst also believes that due to the gradual decline of the right to speak in technical standards and the failure to compete for share in emerging markets, overseas equipment manufacturers such as Ericsson and Nokia have fallen sharply in the 4G era. This change allowed Huawei to defeat Ericsson in 2013. The world’s largest communication equipment manufacturer, and ZTE in the 5G era is highly comparable to Nokia in the 4G era in terms of operator business, and is expected to become the biggest beneficiary of the rebalancing of the global communication equipment market in the 5G era. Communication equipment market competition is expected to look around.
According to the latest research report of the foreign consulting agency Dell’Oro Group, among the world’s top five communication equipment companies, Huawei is still the world’s largest equipment supplier in 2019, with a market share of 28%, the same as the global share in 2018. Nokia still ranks second globally with a market share of 16%, but down 1 percentage point from 2018. Ericsson ranked third with a market share of 14%, also unchanged from 2018. ZTE ranked fourth with a market share of 10%, up 2 percentage points from 2018. Cisco ranked fifth with a 7 percent market share, down 1 percentage point from 2018.
The aforementioned analysts believe that from the perspective of global market share in 2019, Huawei has maintained the world’s first place under the pressure of the US ban, and its share has not yet been lost. The global share has increased, and it is expected to follow the trend in the next few years; Ericsson, Nokia, and Cisco failed to expand their market share globally when Chinese manufacturers were sanctioned. The current 5G global competition continues.
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