Your browser is not supported. Please update it.

29 November 2022

Mobile industry will be reshaped by decline of globalization

Special Report: National 5G objective

For now at least, the era of globalization is coming to an end, hastened on its way by the pandemic, by wars in various arenas, by supply chain and skill shortages with associated inflation, by environmental concerns, and by the new geopolitics. National and pan-regional governments are retreating behind their borders, allying with geographical neighbors and seeking to assert firm control of their own security, data and value chains.

No industry is more inherently globalized than telecoms, and hi-tech in general. But just as connectivity and compute underpin global chains of communication and trade, so they also enable new kinds of security attack on a worldwide scale. Technology, especially 5G, satellite and cloud platforms, have become central to the attempt by the world’s power players to make themselves less reliant on potentially unfriendly states for crucial components; to grow self-sufficiency and a local production base in h-tech; and to take full control of data, energy usage, security and the supply chain.

In today’s issue, we see several examples – in the European Union’s roadmap to its own satellite constellation, prioritizing government communications that can be fully secured and managed; and changes to the EU’s and UK’s policies to increase security. There are also new developments in India’s bid to build an ‘India-first’ 5G manufacturing and deployment base, with Tata expanding its role as a telecoms equipment vendor. Other important areas where the major economic countries or blocs are seeking to shape their own destiny are in sovereign cloud, where Europe’s largest telcos are considering building a fully secure cloud platform to serve the region’s governments and businesses as well as future virtualized 5G networks.

Last week, the issues were thrown into sharp relief by reports of mistreatment of workers assembling iPhones in Foxconn’s Chinese factory. US firms such as Apple were already incentivized to defocus on Chinese manufacturing and component supply because of the increasingly stringent government restrictions on trade with China. Human rights issues will only accelerate the bid to bring production home or, in the case of iPhones, move to other regions that can offer low costs. Foxconn will not see its deal with its largest customer reduced by the reports, but will invest in expanding its plant in India to assemble an estimated 25% of all iPhone models by 2025.

The new focus on local capabilities has upsides – spurring innovation and investment in a broadened group of start-ups and other companies, for instance, rather than leaving key platforms such as mobile networks in the hands of a few large organizations. But it also risks fragmentation, the emergence of technology and intellectual property islands, and a breakdown of the economies of scale that global systems brought. It is possible that 5G will be the last mobile standards family that will be developed and adopted globally, if the trade and security disputes between the USA and China, embroiling their respective allies, are not addressed.

The pros and cons of localization are epitomized in Open RAN, which is a vehicle for many governments’ attempts to foster a homegrown ecosystem and 5G power base. There is considerable innovation around Open RAN, some of it from non-traditional players, and that is encouraging vendors and operators to think differently and experiment with new architectures. However, the new vendors and solutions are immature as yet, and inadequate for large-scale deployment in macro networks. The recent contract awards by India’s Reliance Jio and Bharti Airtel – both very interested in open architectures – were traditional in RAN architecture and vendor choice (Ericsson and Nokia). With Huawei and ZTE virtually out of the picture, no other firms could scale up production and roll-out to support the aggressive deployment timescales of the leading Indian MNOs.

Of course, many elements will remain global. The sovereign cloud initiatives in countries such as France and Germany involve the US hyperscalers, even if they have to respect local security-focused rules and frameworks. And while there is a fear that 3GPP, O-RAN Alliance and others will lose their global reach in future, spectrum still has to be allocated on a global basis if communications networks are to function at all.

This doesn’t mean that implementation of spectrum regulation will not become more localized, as different nations seek to focus on their particular strengths and their goals for 5G. South Korea’s revocation of the 28 GHz licences of two operators highlights an ambitious plan for 5G that is heavily aligned to national interests in supporting industrial users and very advanced user experiences. The plan may have been over-ambitious at this stage, but this millimeter wave spectrum is unlikely to sit idle for long – it is too important to the technology plan, which in the home of Samsung, is closely tied to national pride and self-sufficiency.

Even in China, where allocations of spectrum to support national industry programs have all gone via the MNOs, a direct award of airwaves to a critical industry – aviation – is now reported. The more countries and groupings seek self-sufficiency and hi-tech leadership, the more they will start to consider issues such as spectrum and 5G capabilities through the lens of national security and industrial interest. This could see a burst of innovation, but also risks sidelining the operators, if they do not align closely with the national plans of their home markets. The leading European telcos probably realize this, given their grasp to drive the EU sovereign cloud discussions, but others may face difficult decisions about global reach versus local power.