China Sets Sail to Enterprise 5G and Targets 3,000 Private Network Deployments by 2023

As is well-known within the industry, China is one of the most advanced markets when it comes to 5G deployments both in the consumer and the enterprise domain. To accelerate 5G technology and its adoption in key industries and society at large even further, the Chinese Ministry of Industry and Information Technology in April 2021 launched the so-called “Set Sail” Action Plan to set out a range of qualitive and quantitative targets for China’s 5G industry to reach by 2023.

While ABI Research recently published Chinese Government Presents Bold “Sailing Plan” to Transform Industries (IN-6234) one particular datapoint is interesting to further discuss: by 2023, the Chinese government aims for 3,000 private 4G and 5G network deployments among enterprises. To achieve this, the Chinese government announced a proposal making additional funding available for enterprises wanting to invest into modernizing their technology infrastructure. ABI Research’s recently updated Shared Spectrum and Private Networks Tracker counts 41 fully disclosed and publicized private network deployments in China. Sources from within the industry speak about several hundreds of private network deployments that are, however, not publicly disclosed. These numbers as well as the ambitions laid out by the Chinese government once again underline how far advanced the Chinese market is when it comes to embracing the cellular enterprise (or 2B) opportunity.

The natural question to ask, then, is where this advance in the Chinese market stems from. The answer to this question lies in two different segmentations. On one hand, a distinction has to be made between regional-specific regulatory and political (therefore, “external”) factors while factors from within the enterprise verticals and telecom industry (therefore, “internal”) are on the other hand.

Form a regulatory standpoint, for example, licensed spectrum in China is exclusively available through network operators. While certain spectrum resources are reserved for industry indoor deployments, these are still licensed to network operators who subsequently offer these to enterprises. Furthermore, from a political point of view, communication service providers (CSPs) are discouraged from partnering with well-established hyperscalers but are encouraged to build up their own operator cloud capabilities instead. Both of these external factors cement the role of operators and transport the linear cellular connectivity supply chain from the consumer domain (infrastructure vendor selling equipment to network operators, who will then offer services to end-customer) into the enterprise business as well.

Internal factors, on the other hand, can then be segmented further into demand- and supply-induced effects. From a demand-side, implementing enterprises have realized the importance adopting cellular connectivity for future-proof digitization. Furthermore, under the “set sails” program, the Chinese government plans to make funding available to enterprises for digitization measures. Within China network operators are seen as the primary enabler for enterprise digitization. While part of this might be ascribed to the fact that mobile network spectrum is still exclusively licensed to network operators (hence, an external factor), there is an internal factor at play as well. After all, enterprises could decide not to deploy cellular connectivity at all if they didn’t trust network operators in this endeavor: infrastructure vendors as well as operators want to design cross industry standards that are not only accepted by co-developed by implementing enterprises. To do this, a range of different initiatives are at play that bring enterprises and infrastructure vendors as well as CSPs together (such as Huawei’s 5G Deterministic Networking Alliance). In addition, the telecom industry in China realizes that the true value proposition for enterprise cellular connectivity does not lie in the connectivity technology as such, but rather in the application it enables. Therefore, market education and commercial offerings are built along different applications. Infrastructure vendors Huawei and ZTE, for example, place a lot of emphasis on 5G enabled solutions around machine vision or cloud-based quality control of manufactured goods.

Of course, insights from the Chinese market can not be taken and applied to other geographical regions as such. For, as discussed in the previous section, differences in regulatory framework as well as the political environment can influence the deployment of private networks. The internal factors, however, can be used as valuable foundation for recommendations to both (potential) implementers and to suppliers of enterprise-grade connectivity solutions.

Firstly, the telecom industry needs to combine efforts to establish common supply chain and harmonized go-to-market strategy to minimize the number of decisions that enterprises need to engage in before deploying a private network. As an integral part, this implies the need for strong collaboration and partnerships between suppliers of private networking solutions as well as edge and cloud computing capabilities to make optimal use of each player’s competitive advantages. In the end, however, integration needs to be driven by one central entity, which will subsequently act as the key interface to enterprises. Who exactly will take over this integration role is dependent on many external factors (e.g., availability of licensed spectrum, traction within the respective regional market) and therefore will vary by region. In China this role seems to be fulfilled by traditional network operators, hyperscalers, or System Integrators (including System Integrator arms of established network operators, such as T-Systems or Orange Business Services).

Secondly, CSPs and infrastructure vendors need embrace the fact that the true value proposition for enterprise 5G does not lie in the technology itself, but rather in the applications it enables. This carries two implications. From a technology perspective, 5G connectivity needs to be combined with adjacent ICT technologies (such as artificial intelligence, extended reality, or cloud and edge computing) to offer complete digitization solutions to enterprises look at ABI Research’s insight  Enterprise Requirements Towards a Full Digitization Platform - Powered by 5G (IN-6178). From a market education point of view, CSPs, infrastructure vendors, and System Integrators should anchor their market education efforts around specific solutions (as Chinese vendors Huawei and ZTE do with their machine vision or cloud-based quality control solutions) rather than only 5G private networks as such.  

Above all, the telecom industry needs to accept enterprises as partners instead of only clients for private network deployments. Therefore, prospective implementers need to be involved in formulating technology standards that address key enterprise requirements, as the Chinese government is proposing. Importantly, this should include enterprises from a variety of verticals, and not just be limited industrial manufacturing.  The recently announced Memorandum of Understanding (MoU) between 5G-ACIA and the OPC UA is first step into the right direction, but more needs to happen, especially with enterprise verticals beyond manufacturing.