VIEWPOINT

With an average age of only 30.2, and explosive growth of unicorns, Asia Pacific has entered the golden time of digital economy and ICT infrastructure development, driven by sustained demand for ICT infrastructure and abundant digital content for consumers.

Meanwhile, the pandemic has sped up digitalization in Asia Pacific. Since the gradual opening up, major countries in the region are expected to maintain good recovery momentum in 2023, with GDP growth forecasts over 4%, leading to an upgrade in telecom consumption.

The communications industry is expanding at an incredible pace in the Asia-Pacific. The need for connectivity in ICT infrastructure is growing rapidly as businesses and industries advance their digital transformation initiatives and millions of devices become connected thanks to 5G. While this change has given businesses many new opportunities, it has also presented several challenges.

In certain 5G areas, where breakthroughs and deployments are showcasing increasingly fascinating application scenarios and metaverse applications, 5G development is gaining even greater traction. With the advent of 5G, telcos will have a tremendous opportunity to fully realize the promise of technologies like the Internet of Things (IoT) and Edge and develop new sources of revenue.

It becomes imperative that 5G networks continue to advance and evolve in order to meet this challenge because rapid development also places increasing demands on the network’s capabilities. Here, based on region-specific 5G network deployment stages, global telco solution supplier Huawei has been closely collaborating with the sector and assisting Asia-Pacific telcos in getting ready for a new era of connectivity.

Diverse deployments

The features offered by 5G enhance the secure remote execution of mission-critical communications (such as industrial automation and remote healthcare), high-speed video streaming and connecting a vast number of sensors. However, the challenge for telcos is all regions of Asia Pacific are at different stages of 5G deployments.

While some are working to increase 4G speeds and services, others have jumped into 5G deployments to expand coverage. There are many who, while waiting for favourable government policies and rising customer demand to build the 5G infrastructure, nevertheless wish to enhance 4G LTE capabilities.

“The challenge for the industry, is that various countries are at different stages of 5G deployment; some are further along than others. Some nations are still utilizing 4G technology and are working to increase the network’s capability. Although 5G is popular, operators must contend with varying levels of device penetration,” says Abel Deng, President, Carrier Business Group – Asia Pacific Region, Huawei. He was speaking in conversation as part of a roundtable at Mobile World Congress 2023.

Deng continues by stating that there are three ways to the 5G installations. Massive base station deployments for 5G are part of it, and other nations are still building 5G-ready networks and LTE, respectively.

Development of 5G and 5.5G

It is essential that 5G networks continue to develop and advance if they are to completely realize their potential and satisfy the continuously expanding connectivity needs of users. To completely improve network connectivity, switch from connectivity-based development to full-service enablement, and working with industry partners to transition to an intelligent society, Huawei has been actively working on the concept of 5.5G Core, which may significantly boost new application scenarios and services.

” broadband  speed acceleration and latency reduction are one of the important features of 5.5G.  5G and 5.5G will enable the industries digitalization. For example, to get the automation going, low latency is important, which need 5G or even 5.5G to get higher precise manufacturing; M2M requires high uploading rates, which 5.5G can perfectly meet this demand;” Deng says.

The evolution to 5.5G, which will be characterized by improvements in enhanced Mobile Broadband (eMBB), ultra-reliable low-latency communication (URLLC), and Massive Machine-Type Communications (MMTC), as well as new capabilities for sensing, passive IoT, positioning, and intelligence, is being driven by emerging 2C and 2B applications, which call for further advancements in 5G capabilities.

But is 5.5 G a whole new network? “The idea is to upgrade the existing network but will need to be done on a case-by-case basis,” Deng clarifies.

Improving the infrastructure for connectivity

Several cutting-edge products and services have been offered by Huawei (H) to the Asia Pacific region. It sets aside over 25.1% of its 2022 annual income for R&D. The company’s market-leading technologies, such as Blade AAU and META AAU, which have been used by some of its most significant clients, may increase customer satisfaction and capacity while reducing energy usage by up to 30%.

It is helping APAC telcos gradually evolve from traditional networks to “autonomous networks” to achieve high-quality 5G development and intelligent O&M (NSOC O&M Mode).

Huawei, one of the few in the market to offer a full suite of ICT solutions with ‘cloud-pipe-device’ synergy, combining the physical and digital worlds, has established more than 160 Smart Cities in more than 100 nations and regions. Particularly in the Asia Pacific, its solutions have assisted Pattaya in reducing traffic bottlenecks by more than 30%, increasing travellers by more than 10%, and boosting operators’ profits through high-value connections.

Another example for Asia-Pacific is its collaboration with SCG, a leading conglomerate that runs its operations in accordance with ESG criteria to create autonomous driving systems using 5G technology. The self-driving capability has helped SCG reduce energy consumption by more than 50% and improves transportation efficiency by 8%.

Deng asserts that utilizing digital technologies, especially 5G, is expanding prospects. The industry must always consider how things will be in ten years, and Huawei is taking steps to modernize our networks and embrace the chances. “We are working with various carriers to build amazing 5G application cases. ” says Deng.

 

 

Software and internet technology giant Microsoft have today announced an expanded 10-year partnership with broadband ISP and mobile giant EE (BT). This is said to reflect a “commitment in cloud gaming to bring PC games built by Activision Blizzard, following the acquisition, and Xbox” to customers of the UK telecoms provider. At the time of […]

Press Release

OneWeb, the low Earth orbit (LEO) satellite communications company, announced today that it has been selected for two trials to connect remote communities for the UK government’s Very Hard to Reach Premises connectivity programme, which aims to connect the UK’s most remote homes and businesses.

As part of the programme, OneWeb’s high-speed, low latency LEO network will deliver connectivity for trials through its partners BT and Clarus. Trials will take place in the Shetland Islands and on Lundy Island, near the north Devon coast. These trials build on OneWeb’s strong track-record of delivering community broadband to sites in remote locations such as Canada, Greenland, and soon to British territories in the South Atlantic.

“Our Wireless Infrastructure Strategy sets out our plan to ensure everyone, no matter where they live, can reap the benefits of improved connectivity. With the help of companies like OneWeb, we are committing £8m to provide satellite connectivity for our most remote communities so that no one is left behind, while ensuring all populated areas in the UK will be served by what I call ‘5G-plus’ technology by 2030,” said Michelle Donelan MP, Secretary of State for Science, Innovation and Technology. “This package of measures turbocharges our progress towards becoming a science and tech superpower with a substantial initial investment in the future of telecoms.”

“We are excited to demonstrate the impact of LEO connectivity through these trials. From the beginning, OneWeb’s mission has been to bridge the digital divide for communities, but there are still countries around the world where reliable access to connectivity is unattainable,” said Neil Masterson, CEO OneWeb. “Working with the government, alongside our trusted partners and customers, OneWeb can help to bring connectivity to the communities and businesses that need it most, in underserved regions in the UK and around the world.”

Having recently completed its 18th launch, OneWeb now has a constellation of 618 LEO satellites, enabling the roll-out of global coverage later this year. This enhances OneWeb’s existing connectivity solutions, which are already live in regions north of 50-degrees latitude and delivering connectivity to previously unconnected and underconnected communities, businesses and local governments.

OneWeb has 400 staff today based in the UK, the majority of which are in STEM roles, making a significant contribution to the upskilling of the UK economy and building a new industry in the UK.

Is the UK broadband industry doing enough to ensure that every part of the UK receives high quality coverage? Join the community in discussion next week at Connected North

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US wireless operators move to allay 5G aviation fears

News

With the cost of launching new chip fabs in the US ballooning alongside inflation, semiconductor giants are growing concerned over the conditions attached to receiving CHIPS subsidies

Back in 2022, US President Joe Biden signed into law the CHIPS Act, a programme providing $280 billion in funding to boost domestic research and production of semiconductors. Of this total, around $39 billion was set aside to subsidise manufacturing that took place on US soil, hoping to entice chip giants like Samsung and Taiwan Semiconductor Manufacturing Company (TSCM) to set up shop in America.

CHIPS effectiveness was quickly apparent, with TSMC, Intel, and Samsung all having committed to new semiconductor fabrication plants in the US. Combined, these new sites are worth more than $100 billion.

However, the subsequent downturn of the global economy, with rising inflation and numerous supply chain woes, have left these chipmakers uneasy about the exploding cost of their planned investments; Samsung, for example, says that its planned $17 billion chip fab in Texas, announced in 2021, will in fact likely cost them $25 billion.

More recently, concerns have also started to be raised about the conditions attached to the CHIPS subsidies. Recent guidelines from the US Commerce Department including sharing excess profits with the US government and potentially revealing sensitive cost structure information.

“All of this is confidential information. The most important thing in chips is cost structure. Experts will be able to tell our strategy at a glance,” explained an anonymous source speaking to Reuters.

Since this revelation, the various chipmakers have been communicating with the US government over these stipulations, with TSMC suggesting that the conditions in their current form “cannot be accepted”.

The US Department of Commerce, meanwhile, is attempting to allay concerns, saying that all confidential business information will be protected and that the sharing of excess profits will only occur when projects significantly exceed projections.

The exact size of the subsidies being sought by the semiconductor firms has not been revealed.

The resolution of this issue is especially pressing for TSMC, which missed its sales target for the second straight quarter earlier this month, citing lukewarm demand.

Perhaps unsurprisingly, these discussions are also of great interest to the Taiwanese government, for whom TSMC is at the heart of one of its largest and most geopolitically important industries.

“The Taiwan government and industry have a very close understanding [of what is going on] and hope that the details of the relevant subsidy legislation will not affect industrial cooperation between the two sides and costs for industry-related construction,” said Taiwan Economy Minister Wang Mei-hua earlier this week.

Want to keep up with all the latest telecoms news? Click here to receive Total Telecom’s daily newsletter direct to your inbox

Also in the news:
Telkomsel to merge with Indonesia’s largest fixed broadband operator
French operators head to court seeking compensation for forced Huawei removal
US wireless operators move to allay 5G aviation fears

The seventh contract awarded under the UK’s £5bn Project Gigabit broadband rollout scheme – worth “nearly” £14 million – has today been awarded to ISP Wessex Internet, which will upgrade connectivity for “around” 10,500 hard-to-reach homes and businesses across rural parts of the New Forest in Hampshire (England). The provider already has plenty of experience […]

Earlier today the Government revealed (here) that they’d commit £8m to help deliver “high-speed broadband” (they didn’t clearly define this) via Satellite ISP solutions for up to 35,000 of the UK’s “most remote properties” (i.e. those unable to get gigabit-capable connections). We now know that this will involve OneWeb’s Low Earth Orbit (LEO) network via […]

Asterion-backed MS3, which is working to rollout a 10Gbps capable Fibre-to-the-Premises (FTTP / XGS-PON) broadband ISP network to cover 530,000 premises across the North of England by around 2026 (here), has today announced the appointment of a new senior leadership team ahead of their rollout accelerating. At present, most of MS3’s early build has taken […]

Sky Mobile, which is an O2 (VMO2) powered mobile operator (MVNO), is adding cellular laptops to its range of available devices from just £11 a month (includes mobile broadband plan). Customers who take one of these will benefit from Sky’s data rollover feature (i.e. any unused data each month gets rolled into a Piggybank which […]

VIEWPOINT

I attended Huawei’s 2022 financial results meeting in Shenzhen and it was mostly a story of “back to normal”. As CFO and now rotating Chairperson Sabrina Meng said:

“In 2022, Huawei gradually pulled itself out of crisis mode. US restrictions are now our new normal, and we are back to business as usual.”

The ending title for Eric Xu’s presentation was “sustainable survival and development”. Note: This is in contrast to their 2021 report which was under the title “Solid Operations, Investing in the Future”.

Here were my take-aways:

1. Huawei’s Strategy Has Always Been About Long-Term Survival – And That Means Continuity, Resilience, and Quality

Twenty plus years ago, Huawei founder Ren Zhengfei began writing and speaking about how to survive long-term as a technology company. That’s a really good question because it is actually quite rare. Most major tech companies don’t last beyond one or two technology cycles. Maybe they get disrupted by the new technology. Or maybe they lose focus, as the now rich founders move on. Or maybe the culture just becomes lazy and non-innovative.

So, Mr. Ren studied tech companies that did last, like Hewlett Packard. And he explicitly set Huawei on a strategic course to focus on long-term survival. And that means that the key question for Huawei for the past 2 years has been the retention of its international carrier customers.

Huawei needs to have international scale in its ICT business. You cannot win as a telecommunications equipment company with only one country, regardless of the size of the US or China. You need to be international to have the scale to compete in manufacturing cost and research spending. So Huawei’s core business has always been China plus international telecommunications (ICT).

Huawei really began when they started design and manufacturing their own simple telecommunications equipment (like PBX switches) in the early 1990’s. And that was when they also really began investing in R&D. This began what would become a +30-year march in increasing manufacturing and R&D scale. R&D spending increased (yet again), reaching 161B RMB. This was 25% of revenue, a very big increase from their typical 15% of revenue. And it was up from 142B (22%) in 2021, which was already very high.

This march took them from fixed into wireless equipment. From 3G to 4G and then 5G. And into all the technologies surrounding ICT (such as consumer devices and cloud). This march also took them from China to +170 markets. To +$100B in revenue. And eventually to surpass Ericsson as the largest telecommunications manufacturer in the world.

But this all depends on winning internationally. Not just in China.

So, you can see Huawei bending over backwards to ensure international carriers are getting the highest quality equipment now and in the future. You can see the company going above and beyond to maintain the trust of these customers. The key number I look at is the percentage of Huawei’s ICT revenue coming from international (i.e., non-China) sources. In 2021, it was +50% of carrier revenue.

This is what I heard throughout the presentation by Eric Xu and Sabrina Meng.

There was a lot of talk about having the highest “quality” equipment.
There was a lot of talk about ensuring the “continuity” of supply.
There was a lot of talk about “resilience”. That means diversifying the supply chains and redesigning components to avoid any potential future risks.
There was details about Huawei’s capital structure and big cash reserves. They are sitting on a lot of cash versus debt.

2. Cloud Revenue More Than Doubled to +45B RMB in 2022. This is Now Huawei’s Biggest Growth Opportunity.

This was the first year that cloud was broken out as a business unit. It was under Enterprise in 2021, which totaled 102B RMB in revenue for that year. For 2022, cloud revenue reached 45B RMB. It is now a significant business, although still small compared to ICT and Consumer.

But cloud revenue appears have more than doubled in 2022. The presentation didn’t have an exact growth number, but they did use the phrase “maintaining fast growth”. This is an increase from the +30% growth in 2021.

Cloud is important because it is now significant in size – and because it is a business that has the potential to grow 10x in the future.

Compare Huawei Cloud to Alibaba Cloud, which had $11B in revenue in 2022. Matching Alibaba would mean another doubling of Huawei Cloud revenue.
Look at Amazon’s AWS as a comparable. Cloud in China does have significantly slower growth and adoption than we see in the US. But the overall markets could be comparable in size one day. If Huawei Cloud were to one day just match the 2022 revenue for AWS, that would mean over 350B RMB in revenue, surpassing ICT in revenue.

For China cloud, Alibaba Cloud is still the market leader. But in 2021, Huawei Cloud was #2 or #3, about tied with Tencent at 17%. And keep in mind, Western cloud companies will never be allowed in much of China, and especially not in areas like government and financial services.

Overall, cloud’s top line growth in 2022 looked pretty good (from the outside). It is Huawei’s biggest potential revenue growth opportunity. Profits and ROIC are another question.

3. The Hard Hit Consumer Business Revenue Stabilized at 214B RMB in 2022. This Was Surprising.

During the China-US “tech war”, Huawei found itself at the center of a political storm not of their making. And in 2020-2021 it impacted quite a bit of their business.

Their ICT business was politically pushed out of several developed markets (UK, Japan, etc.). Either in part or entirely.

Their tech supply chain was hit across the board. The consumer business unit subsequently fell by 50% to 243B RMB in 2021, with international smartphone sales being the hardest hit. And unlike in ICT where the components and supply chain could be restructured, it was not obvious how to overcome limitations on high end chipsets and operating systems.

And yet, the consumer revenue in 2022 was 214B RMB (vs. 243B in 2021). I thought it would be quite a bit lower. Yet, the consumer business appears to have stabilized its previous decline.

I assume this is mostly coming from smartphones in China (their foldable smartphones are awesome) and their “1 + 8 + N” strategy. They were already moving from selling smartphones to selling smartphones plus a suite of 8 ancillary products (earbuds, smart home, etc.). These ancillary products don’t require the same chipsets and are compatible with phones everywhere. I used Huawei earbuds which are pretty great.

Overall, Huawei’s Consumer Business appears to have successfully shifted its product mix and stabilized its revenue. If this continues, it will defy a lot of analyst expectations.

***

Overall, the company looks like it has come out of the political storm quite well. I expect the conversation to shift more from resilience to growth in 2023.

 

The UK government (DSIT) has today announced that, as part of the new Wireless Infrastructure Strategy (WIS), they have set out an ambition to “blanket the country with the fastest, most reliable wireless coverage available” – with the plan being for “all populated areas to be covered by ‘standalone’ 5G (5G-plus) by 2030“. The update […]