5G Race between U.S., China Burdened by Trade Barriers
5G is the abbreviation used for the fifth-generation wireless network and its accompanying technology. It is being developed and deployed by Scandinavian telecommunications companies Ericsson and Nokia, Chinese competitor Huawei, and several others. In the U.S. and much of Asia, internet service providers such as Verizon and Pacific Internet are also selling 5G technologies and preparing for the predicted Fourth Industrial Revolution, which will be led by smart factories and safely connected cars (two of the many IoT advancements that are supposed to occur in the next few decades). Here we find a technological race between multinational private corporations hugely intensified by political unrest between President Trump and China’s President Xi Jinping.
Huawei, the leading telecommunications company in China, has proven to be dominant in the race towards 5G deployment, taking “30% of all RAN market revenues last year, with Ericsson collecting 27% and Nokia about 22%” (Morris). More importantly, estimates claim that Huawei is 1-2 years ahead of its competition in its development of the actual hardware behind 5G. However, President Trump believes that Huawei (which is heavily funded by the Chinese government) is attempting to spy on Americans and Europeans by offering licenses to 5G technology internationally. These fears aren’t based on facts, but rather Huawei’s tendency to copy ideas from Western companies, such as Apple and Cisco Systems.
Trump seems to understand the importance of this race for technological advancement and is taking what he believes to be cautionary steps, but the game he is entering is much more complicated than it appears. By banning American companies from shipping 5G technology to Huawei until further notice, Trump is interfering with the sales of Qualcomm, Google, Intel, and others, some of which sell a majority of their chips to China. Unfortunately, it appears that President Trump only is viewing two players in this game–himself (or possibly the U.S.) and China.
This game is ignited by China’s emerging technological dominance and apparent control over the American economy and debt crisis. Trump’s tariffs and bans, implemented mostly to express American dominance in trade and technology, change the rules of the game completely. Rather than simply competing in technological power and prowess, companies are now being forced to slow down/completely halt product development. China faces the option to reciprocate by placing its own set of barriers, but this could lead to a large-scale trade war.
Although we are unsure who (if anybody) will end up winning this game, it certainly does not seem like either country will back down. As of now, the Nash equilibrium of this two-player game appears to be one in which both are equally persistent: a long trade war in which technological productivity is sacrificed for the ability to “look stronger” than another country. Changes in political leadership could certainly put a new spin on the situation if either side were to call for a compromise. But for now telecommunications companies will have overcome political barriers before they can provide us with the highest connectivity the world has seen.
Sources:
Ian Morris’ analysis “Ericsson, Nokia Boast 5G Wins Against Each Other, but Fail to Stop Huawei”: https://www.lightreading.com/mobile/5g/ericsson-nokia-boast-5g-wins-against-each-other-but-fail-to-stop-huawei/d/d-id/752072
South China Morning Post article on 5G race: https://www.scmp.com/news/world/united-states-canada/article/3005988/us-announce-large-scale-5g-development-plans-race