In recent years, the central high-level meeting has repeatedly focused on the construction of new infrastructure represented by 5g (hereinafter referred to as “new infrastructure”) in order to provide new momentum for economic and social development. On March 4, 2020, the Standing Committee of the Political Bureau of the CPC Central Committee held a meeting to emphasize the need to accelerate the construction of 5g network, data center and other new infrastructure. With the continuous improvement of the state’s attention to 5g, local governments, financial institutions and related enterprises will increase investment in the future to seize the commanding height of industrial competition.
1、 Development of 5g industrial chain in new infrastructure construction
As the primary field of new infrastructure, 5g is becoming more and more important. It not only has an enabling effect on traditional fields, but also plays a key technical support role for emerging industries such as artificial intelligence and industrial Internet.
5g industrial chain is mainly composed of upstream mobile communication infrastructure, midstream mobile communication operator services, downstream terminals and application scenarios. Each link also includes electronic components, raw materials, base station antennas, network equipment, system integration and service providers, operators and other subdivided industrial chains.
Among them, the upstream mainly includes base station system, network construction, network planning and maintenance construction. As the foundation of 5g communication industry, this link presents the characteristics of large investment scale, long return cycle and high technical requirements. It is the key investment field of national capital.
Midstream mainly builds an application platform to meet customer needs by cooperating with many upstream and downstream enterprises such as software and hardware providers. In this link, the leading role of state-owned enterprises represented by the three major mobile operators is obvious, and the market competition in relevant supporting fields is fierce.
The downstream mainly includes terminal devices represented by smart phones, Internet of vehicles, industrial Internet and other application scenarios. This link is mainly driven by the market, and each segment basically forms a pattern of radiation development of small and medium-sized enterprises driven by 100 billion leading enterprises.
2、 Value analysis of four key links of 5g industrial chain in new infrastructure construction
In the context of favorable policies for new infrastructure construction, 5g’s core position is self-evident. As the core of the future digital economy, 5g development is not limited to “hard infrastructure” fields such as communication capacity expansion, core network and data center construction, but also includes the soft environment of the combination of traditional industries and digital economy, covering new terminal application scenarios.
5g is a multi-dimensional, three-dimensional and full life cycle industrial ecosystem covering the underlying core technology, basic network architecture, typical demonstration applications, product standard system and so on. Therefore, it is of great significance to systematically sort out the subdivided fields of 5g industry and clarify the key links of relevant value chain to promote the high-quality development of 5g industry.
（1） Base station system
The base station system is located at the upstream of the 5g industrial chain and is the underlying architecture of China’s new infrastructure development in the future. Accelerating the layout of 5g base station system can not only improve the speed and efficiency of existing information communication, but also greatly promote the rise of emerging industries such as artificial intelligence and industrial Internet.
5g base station system mainly includes antenna, RF module, small and micro base station and other fields. Large scale antenna technology, antenna RF module integration and indoor distribution of small and micro base stations are the main direction of base station system evolution in the future.
Based on the future demand for high network capacity and full spectrum access, the construction of 5g base stations has become the focus of China’s mobile communication construction. It is expected that the number of 5g base stations in China will reach about 5.8 million in the future, about 1.5 times that of 4G base stations.
Specifically, the industrial value chain of 5g base station system presents the following characteristics:
First, the demand for base station system is huge, and the capital driving effect is obvious. As the infrastructure of the whole 5g communication industry, the base station system construction and later operation and maintenance require huge capital and time investment. Compared with 4G, 5g communication reconstructs the architecture of the base station system and adopts the new networking mode of “macro station + small station”. The number of new 5g base stations in the future is expected to be more than twice that of 4G. In addition to the need to build 5g small and micro base stations, the upgrading of 4G base stations also belongs to the capital intensive field.
Second, key areas are controlled by others, and domestic substitution is advancing steadily. With the active trend of 5g antenna highlighted, base station terminal equipment manufacturers will gradually occupy the high-end links of the value chain in the future. Taking RF device modules as an example, high-end chips, power amplifiers and filters are mainly monopolized by European and American giants. Qorvo, Broadcom, skyworks and Murata occupy more than 90% of the power amplifier market share, while China’s local manufacturers mainly focus on medium and low-end products, and there is a large gap between the performance indicators and the foreign advanced level.
Third, there is an obvious gap in the volume of enterprises, and the risk of industry reshuffle increases. Due to the rapid expansion of 5g base station construction and low entry threshold, the market competition is becoming more and more fierce. In terms of volume, the scale of China’s local enterprises ranges from millions to hundreds of billions of yuan, and the whole market will be highly variable in the future. It is worth noting that at present, the internal order and external environment of China’s 5g base station industry standards, technology and law have not been finalized, and different enterprises may adopt different technological innovation and marketing strategies.
（2） Network architecture
As the intermediate link of the industrial chain, 5g network architecture can meet the ultra-low delay of millisecond communication. It is the highway for information transmission of new infrastructure in China in the future.
5g network rack consists of transmission equipment and network planning and design, mainly including communication network equipment, SDN (Software Defined Network) / nfv (network function virtualization) solution, optical fiber and cable, optical module, network planning, operation and maintenance, etc.
In order to adapt to different application scenarios, 5g network architecture needs disruptive changes. The key is to use SDN / nfv technology to form different capability sets including infrastructure, pipeline capability, value-added services and data information, so as to realize network function virtualization, resource centralization, service automation and cloud platform management and operation.
Specifically, the industrial value chain of 5g network architecture presents the following characteristics:
First, there is still room for investment in main equipment, and China has a leading advantage. The main equipment investment is mainly focused on the construction of the operator’s transmission network, bearer network and core network. The substantial increase in the number of base stations brought by 5g construction will increase the demand for main equipment of the transmission network. At the same time, the SDN / nfv development promoted by operators will promote the decoupling of software and hardware of main equipment, and the price continues to decline. It is expected that the investment in main equipment will still have 30% growth space, and the future market space will be about 600 billion.
Second, the optical module is gradually high-end, and the demand for optical fiber and cable is picking up. Compared with 4G, the data transmission rate of 5g is 10-100 times that of 4G, and the high-speed optical module will be just needed for 5g construction in the future. Therefore, under the trend of high-end optical module demand, leading enterprises with core optical chip design and manufacturing capacity will benefit. At present, China’s 4G market is basically saturated. With the continuous promotion of 5g construction, the demand for optical fiber will continue to grow in the next 3-5 years.
Third, intelligence has become the trend of operation and maintenance, and network planning is concentrated to the leader. In the future 5g era, network planning, operation and maintenance will be centralized and intelligent, from passive operation and maintenance to active defense, and then develop to “intelligent operation and maintenance”. With the continuous progress of communication technology, it equipment in 5g period will be continuously updated and iterated, and the degree of complexity will be higher and higher. In order to carry the expansion of user scale, the equipment will continue to develop to large capacity and complexity. Leading enterprises with comprehensive network planning and operation and maintenance capabilities will become beneficiaries in this field.
（3） Terminal equipment
In the 5g era, diversified terminal equipment will give full play to the bridge between “hard infrastructure” and “soft environment”, which brings endless possibilities for the application of new infrastructure scenarios in intelligent manufacturing, digital life and information society.
As the individual user and the terminal with connection function become the information carrier, the platform feature of 5g terminal equipment will be more prominent in the process of information interaction.
5g terminal equipment covers not only smart phones, but also various technical products for in-depth commercial applications such as AR / VR, Internet of vehicles and Internet of things.
Specifically, the value chain of 5g terminal equipment industry presents the following characteristics:
First, there are a wide variety of end products and the process of technology research and development is accelerated. As of June 2019, there were 96 5g terminals worldwide, covering 39 manufacturers. Compared with 4G in the same period, the development speed was significantly accelerated. 5g terminal forms include 13 kinds of smart phones, CPE, modules, USB terminals, etc. In recent years, China’s terminal equipment enterprises have accelerated the pace of technology research and development. Industry leading enterprises have made efforts in the formulation and research of commercial chips, smart phones, 5g standards and commercial terminals, and used the technical advantages in specific fields to seize the domestic and foreign markets.
The second is the outbreak of aiot tuyere, and the enterprise layout is intelligent ecology. “Alot” (i.e. “Ai + lot”) refers to the deep integration of artificial intelligence and the Internet of things in practical applications. Aiot has great market potential in smart home, manufacturing and urban governance. At present, domestic industry backbone enterprises have formulated relevant strategies, deeply ploughed into subdivided fields and accelerated 5g intelligent ecological layout.
Third, the rise of domestic independent brands, innovative competition and seize the market. With the rapid development of domestic terminal equipment in the 4G era, based on the main innovations of current intelligent devices such as comprehensive screen, off screen fingerprint and wireless fast charging, 5g terminal equipment of domestic independent brand in China will drive the replacement tide of the global market in the future. It is worth noting that the market demand of China’s smart phone industry is weak, and it is gradually changing from emerging products to mature replacement era. Personalization and customization have become the main trend of technological innovation in the future.
（4） Application scenario
5g itself can not only give birth to a series of emerging formats such as ultra-high definition video, VR / AR and Internet of vehicles, but also play a “catalyst” role in the innovation of new information economy models such as mass personalized customization, networked collaborative manufacturing and sharing economy.
Compared with 4G, the average 5g transmission rate can be increased by 10-100 times, the connection density can be increased by 10 times, and the delay will be reduced to 1 / 5 of the original.
Based on the three business scenarios of enhanced mobile broadband, massive machine communication and high reliability and low delay communication, 5g market application in the future will be a typical representative of China’s new infrastructure to promote high-quality economic development.
Specifically, the value chain of 5g application scenario presents the following characteristics:
First, vertical industry integration is accelerated, and typical cases are emerging. Since the first half of 2019, a number of representative cases have emerged in various regions and industries in 5g integrated applications, mainly focusing on ten application scenarios such as VR / AR, ultra-high definition video and Internet of vehicles. 5g commercial value will be most reflected in vertical industry applications. It is estimated that 20% of the application value of 5g comes from personal consumption, while 80% comes from vertical industries.
Second, the VR industry has attracted much attention, and driverless is emerging. VR terminal equipment now occupies a huge market share. In the future, 5g’s high-speed rate and low delay characteristics will provide a better experience for VR. It is expected that after the large-scale commercial use of 5g network in 2021, the shipment of VR / AR equipment will reach the level of ten million units, becoming the key field of investment and financing of various financial institutions.
Third, the Internet of things is in the ascendant, and ultra-high definition video has great potential. At present, China’s three major operators have begun to deploy the Internet of things platform. With the improvement of network speed and the gradual improvement of application terminals, 5g plays an important role in promoting the development of 4K / 8K UHD video industry. It is expected that the scale of China’s UHD video application market will reach 1.75 trillion yuan in 2025.
3、 Reflections on the high quality development of 5g industry under the new infrastructure wave
First, adhere to the combination of software and hardware and build a new communication system with 5g as the core.
Adhere to the principle of paying equal attention to both software and hardware, give play to the leading role of 5g, promote the layout of infrastructure, and strengthen the construction of ecosystem oriented by 5g integrated application.
On the one hand, accelerate the construction of 5g “hard infrastructure”. Accelerate the preparation of special plans for 5g mobile communication infrastructure in various regions, scientifically layout and reasonably determine the scale of 5g construction related facilities. Highlight co construction and sharing, coordinate infrastructure construction needs in the communication field, reasonably dredge competition in the industry and break barriers between industries. For remote areas with coverage needs, avoid repeated construction of network infrastructure and save the overall investment in network construction.
On the other hand, promote the construction of 5g soft environment. Actively promote 5g integrated application-oriented innovation and development, focus on industrial Internet, Internet of things, Internet of vehicles and other fields, empower and wisdom more vertical industries, and promote the digital, networked and intelligent development of various industries. Strengthen the research on 5g vertical industry policies and regulations, improve the industrial ecology and standard system of “5g + vertical industry”, and give full play to the role of standards in guiding and supporting the integrated application of industries.
Second, highlight regional characteristics and promote the differentiated layout of 5g industries in various regions.
According to the advantageous industries and infrastructure construction foundation of each region, further clarify the development objectives of 5g industry and scientifically layout the development priorities of 5g industry.
On the one hand, based on the rapid layout of 5g infrastructure, developed regions such as Beijing Tianjin Hebei, Yangtze River Delta and Pearl River Delta focus on promoting 5g pilot demonstration projects and cultivating a number of leading enterprises in terminal equipment and scene application. Promote the research and development of key core technologies such as 5g terminal chips and core components, strengthen the basic research and cutting-edge layout in the fields of new materials and millimeter wave communication, and realize the overall coordination between the upstream and downstream of the industrial chain.
On the other hand, the central and western regions represented by Henan, Hunan and Sichuan should speed up the construction of 5g infrastructure. In the initial stage, the deployment form of sharing base stations with 4G networks can be adopted to promote the upgrading and transformation of regional network facilities. Based on local characteristic and advantageous industries, carry out 5g innovative application layout, promote the integrated application of 5g with smart tourism, smart manufacturing, smart city and other fields, and promote the construction of a new modern industrial system. Accelerate the construction of 5g supporting industries, improve the construction layout of industrial chains such as new tower infrastructure and services, optical fiber and optical cable, small and micro base stations, and consolidate the foundation of 5g industry.
Third, innovate the investment mechanism and guide multi-party capital to participate in the construction of 5g new infrastructure projects.
Actively explore the investment and financing means of “state-owned capital leading and modern financial support”, and fully mobilize the strength of high-tech enterprises and social capital.
On the one hand, give full play to the advantages of state-owned capital, build a 5g network investment and operation company dominated by state-owned capital and dominated by operators, and introduce equipment manufacturers, financial institutions and leading companies in industrial technology application innovation to enlarge the efficiency of state-owned capital. Establish a 5g industrial innovation joint investment fund group led by state-owned financial institutions and deeply participated by social capital, fully and deeply participate in 5g medium and long-term network construction investment, innovation incubation investment and core technology investment, and open up the resource allocation channel of capital market.
On the other hand, standardize and improve the financing mode of PPP projects (cooperation between government and social capital) and improve the quality and efficiency of public service supply of PPP projects. Explore diversified financing modes, attract venture capital, industrial funds, seed funds and other capital to participate in project construction, and form a new infrastructure investment mechanism. Give play to the scientific and technological strength of high-tech enterprises, encourage banks and other financial institutions to provide more comprehensive capital supporting services for high-tech enterprises participating in “new infrastructure”, and promote the efficient implementation of 5g new infrastructure projects.
Editor in charge: Tzh