China and Huawei are winning the 6G race: A boon for the BRICS, and very bad for the US and Europe

This is a transcript, for the video found here:

Bullets:

6G telecommunications will completely transform the economies of the 21st century.

The first countries to commercialize 6G will enjoy overwhelming advantages over those who are left on 5G protocols and technologies.

6G represents a 1000-times increase in transmission speeds, with latency falling by similar orders of magnitude.

This technology will power quantum gains in manufacturing, education, health and medicine, defense, robotics, aviation, and agriculture.

Huawei and other Chinese companies already have near-monopolies on the construction of telecommunications networks outside North America and Europe, where they are heavily sanctioned. Their sales are booming worldwide, while global sales for top competitors Ericsson and Nokia are falling.

Chinese firms are growing sales and market share in the fastest-growing economies, and across the BRICS and Global Majority countries, while the top Western companies are struggling to make profits in developed markets in 5G. Instead of investing in R&D, and into expansion in developing world markets, Western firms are deploying precious capital buying back shares and increasing dividends.

Report:

Good morning.

Much of the developed world is on 5G telecommunications networks, and the race is on now to build 6G. The difference between 5G and 6, is orders of magnitude increases in speed and applications. 1 terabyte per second is a thousand times faster than 1 gigabyte per second, which is what you might have if you pay a very high premium for connection speed at your house or office. And it is Chinese companies who have a big head start on building the tech for 6G.

Analysts know that the outcome of this is going to decide most everything else: economic competitiveness and productivity, national security, healthcare and medicine, transportation, education, AI, manufacturing, robotics and self-driving vehicles, aviation.

China owns the infrastructure and manufacturing supply chains and ecosystems for the 5G networks, today. Chinese companies have 70% of the base stations and build 80% of the 5G devices.

And China’s strategy in 6G is to emulate what they did in 5G. Chinese companies have most of the market now for the semiconductors needed in the industry, and they also own most of the patents in artificial intelligence. China then has a big edge in setting the global standards for telecom providers for 6G everywhere else, because it is China who is building the plumbing for it.

Huawei is a Chinese company. So is ZTE. Both Huawei and ZTE are under heavy sanctions by Western governments, and the United States and big chunks of Europe aren’t allowed to buy telecom equipment from those Chinese firms. But Huawei is growing anyway, in the rest of the world. Outside China, Huawei is growing market share, while Nokia, in second place globally, is falling.

Notice, too, the companies on this chart. The American companies there are Cisco, Ciena, and Juniper, who combine for under 10% of the global market share for telecom equipment. Nokia and Ericsson are European companies. And that’s a big problem, because the world is splitting apart. In 6G for example, China and the United States have big ambitions to build 6G, and Europe, not so much. That puts Nokia and Ericsson in a bad position. Those companies are getting killed in China by Huawei and ZTE, and Huawei is booking much higher sales across the world than Ericsson or Nokia, even though Huawei is locked out of North America and Europe. Ericsson’s sales were down 5% last year, Nokia’s sales were down 9%. Research and Development spending at Huawei, for the year, was over $25 billion, compared to under $11 billion for Ericsson and Nokia combined.

The challenge for the American and European companies, is that all the growth in telecom is happening outside their markets. Global industry revenues are growing slowly, just 2.9% across the world through the next five years. That’s below the inflation rate. As a result, almost all the cash generated gets gobbled up by CAPEX, dividends, and interest payments.

That means we get stories like this one, from Nokia. Nokia’s equipment sourcing costs are rising because they get a fourth of their equipment from China, which come in with high tariffs when they’re installed in the US or Europe. Net sales are falling, and margins are falling, by a lot. Even so, Nokia’s free cash flow was 700 million euro. What did Nokia do next? The company took all that money to buy back 703 million euro worth of their own shares. “Signaling confidence in its liquidity”. Okay. But that’s what free cash flow is – it’s liquidity. If you want to signal confidence in the company’s ability to compete and grow in new markets, executives could have plowed that into Research and Development, or into acquisitions that could fuel growth in the markets elsewhere. Now the liquidity is gone, along with the money.

There is some good news, back here on this Price Waterhouse report. In lots of countries—with big populations—demand is growing. The farther to the right we move on this chart, you get faster year over year growth in telecom. Remember, the global average will come in, under 3%. But India will see over 20% growth, year over year. Nigeria will be over 11%. Japan, on the other hand, their telecom industry is shrinking. Looking at these countries here, above the 2% line. In North America and Europe, only the UK is in that batch. Brazil, UAE, MENA is Middle East / North Africa. Malaysia, Chile, Turkey, Nigeria, Kenya, Pakistan. Azerbaijan is a tiny market. And then India of course. The fastest-growing telecom markets also happen to be the fastest-growing economies. And it’s in those markets that Huawei is already making all their money anyway.

What this means for 6G, is that Huawei and ZTE and the industrial base of Chinese tech and telecom companies are building all the new telecom systems in Asia, in South America, and in Africa. It’s this map, here, again. The BRICS economic bloc is going to have 6G, built by China and rolled out across the world. The countries that sign up to using Chinese equipment and plug in to 6G networks will vault ahead of Europe, where even their own companies can’t make money in 5G.

The BRICS will have world-class manufacturing and smart factories, self-driving cars, telemedicine, and smart agriculture. These are things that happen, when top corporate executives take cash flows to invest and grow, instead of buying back their own shares. So this is another race that’s already over, because Western companies didn’t even show up.

This is Ciqikou Ancient Town, in Chongqing. Be Good.

Resources and links:

Visualizing the BRICS Expansion in 4 Charts

https://www.visualcapitalist.com/visualizing-the-brics-expansion-in-4-charts/

PWC, Perspectives from the Global Telecom Outlook 2024-2028

https://www.pwc.com/gx/en/industries/tmt/telecom-outlook-perspectives.html

6G is forking, with consequences for Ericsson, Huawei and Nokia

https://www.lightreading.com/6g/6g-is-forking-with-consequences-for-ericsson-huawei-and-nokia

China leads the 6G charge

https://www.reddit.com/r/Infographics/comments/1bxrqmz/china_leads_the_6g_charge/

What Is 6G and What Will It Look Like?

https://www.highspeedinternet.com/resources/6g-internet

6G: The Next Horizon

https://www.huawei.com/en/huaweitech/future-technologies/6g-the-next-horizon

U.S.-China Competition and the Race to 6G

https://www.cnas.org/publications/commentary/u-s-china-competition-and-the-race-to-6g

Fragmenting technology – 6G mobile could divide the world

https://merics.org/en/comment/fragmenting-technology-6g-mobile-could-divide-world

Nokia's Q1 Results Highlight Strategic Shifts Amid Margin Pressures

https://www.ainvest.com/news/nokia-q1-results-highlight-strategic-shifts-margin-pressures-2504/