Huawei’s Bid to Re-Incentivize 5G Digital Transformation in Indonesia through Supply Chain Innovation

On March 7, 2024, Huawei Indonesia unveiled its latest development in its project of promoting 5G in Indonesia—an inaugural launch of Indonesia’s first 5G Smart Warehouse and 5G Innovation Center in West Java. This project is a collaborative effort between Huawei Indonesia and PT Telekomunikasi Selular, a subsidiary of state-owned PT Telekomunikasi Indonesia better known as Telkom Indonesia. With the large bandwidth and low latency provided by 5G, the warehouse uses Automated Guided Vehicles (AGVs) for efficient goods transporting, along with a digital twin and real-time data analysis of the space to optimize inventory management.

In the latest bid to continually enrich the 5G ecosystem in Indonesia, Huawei Indonesia and Telkom Indonesia expect that the 5G Smart Warehouse and 5G Innovation Center’s launch could revitalize the push for digital transformation in the country’s more traditional industries in view of a “Digital Indonesia” as outlined in its planned “Golden Indonesia Vision 2045.” Industries that could benefit from 5G digitalization through collaboration are logistics, supply chain, manufacturing, agriculture, and mining.

This news is a breath of fresh air for efforts to grow 5G implementation across Indonesia’s industry, as adoption rates in Indonesia for private consumers or enterprises have been met with middling to low successful rates. For example, in November 2023, Telkom Indonesia cited its reluctancy to aggressively expand its 5G infrastructure due to several limiting factors like unprofitable business models, lack of necessary 5G spectrum available, and inadequate possession of updated devices capable of receiving and utilizing 5G in an effective manner. A report from GSMA released in December 2023 also points to the regulatory constraints and unfavorable market conditions necessary to facilitate sustainable investments in digital networks in Indonesia.

Huawei is the second major network player to enter the Indonesian plan for digital transformation, with Ericsson’s 5G Innovation Centre targeting Industry 4.0 applications having opened in September 2023. While the outlook for 5G uptake among mobile consumers may seem slow, ABI Research expects strong growth in 5G adoption among various industries in Indonesia due to the promise of infusing governmental support for digital transformation attempting to limit high logistic costs and inefficiency in its supply chain and manufacturing industry. ABI Research believes that when deploying 5G private networks, enterprises could potentially expect an 11.9% increase in gross profit margin, on average, due to operational cost savings, efficiencies, and greater Return on Investment (ROI), while avoiding 20% to 30% of revenue loss due to machine downtime with enhanced bandwidths and higher reliability of low-latency networks.

ABI Research expects the transition and adoption of 5G capabilities in the industrial sector to occur a faster pace of implementation and develop successful use cases than its underwhelming launch of 5G for mobile usage in 2021. With major players in Huawei and Ericsson onboard with the Indonesian government’s support, a combination of technology expertise, along with regulatory and possible infrastructural incentives to digitalize, could create a roadmap for supply chain innovation.

Key industries in the Indonesian landscape can stand to benefit from this push for digital transformation. Innovation in supply chain logistics could potentially reinvigorate the way applicable use cases of 5G implementation can move Indonesian industries forward after its last implementation of 5G smart mining as the first smart mining use case in Southeast Asia, along with its first use case of private 5G network in Indonesia. To scale and replicate success in 5G implementations in Indonesia, consider the following key drivers:

• Supporting Integrating Technologies: A commitment to assimilate 5G within supply chain industries’ infrastructure should possess the ability to process and integrate other new and rapidly improving technologies like Artificial Intelligence (AI), edge computing, and Internet of Things (IoT) capabilities. Standardized protocols that can aid a smooth implementation of upgraded Radio Access Networks (RANs), Next-Generation Node B (gNB), and cloud servers to adapt AI/Machine Learning (ML) models and data distribution could work to fully maximize the potential of low-latency private 5G or network slicing technologies for industry efficiency.
• Restructuring Costs for Scalability: As discussed by the GSMA’s report, regulations in Indonesia should adopt a sustainable spectrum pricing model to aid 5G adoption growth in its urban population. These regulations should also be applied to industries involved in the supply chain, manufacturing, and even mining, where high infrastructure costs for private networks and spectrum provision will trigger a missed opportunity for digitalization transformation critical to the industries’ global competitiveness.
• Security Measures: Potential concerns for an enterprise would be tampering with slice-specific data usage through accessing low-level devices in the system, which could invariably lead to a breach in its network. Such security concerns require upgrading and stress testing security systems before being able to provide secure network slicing offerings to industries to maximize efficiency without worrying about security breaches that could result in long-term losses.