This week’s podcast is about my visit to the Shanghai Mobile World Conference. And the Huawei 5.5G R&D Center. These are my takeaways for what is going to happen next in digital infrastructure.
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Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast where we analyze the best digital businesses of the US, China and Asia. And the topic for today, Huawei launches 5.5G plus some other lessons from the Mobile World Conference in Shanghai. So. I just got back from Shanghai, had about four days there going to me. This is the big mobile world conference. They have one in Shanghai. They have one in Barcelona. They move them around, but I mean, it’s kind of a big deal. And this is sort of the first one we’ve had in China post COVID. So everybody was back. All the companies were back. It was pretty great. A lot of lessons learned there, which I’ll summarize in this podcast, but I think probably the number one thing on my radar. was 5.5G, which is really a Huawei thing. You know, 5G’s kind of been four years of commercial deployment, a lot of it in China, a lot in Thailand, a lot of Asia. I mean, it’s kind of already there. This is sort of the next thing, which I believe is rolling out next year. So I wanna talk about what that means, use cases, how that may or may not impact digital businesses, which is what I care about. Anyways, that’ll be the topic for today. And let’s see, I don’t have any updates or anything today. So standard disclaimer, nothing in this podcast or in my writing or website’s investment advice. The numbers and information for me and any guests may be incorrect. The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment legal or tax advice. Do your own research. And with that, let’s get into the topic. Now, I don’t really have any concepts for today. This is… This is kind of on the periphery of what I do. I mean, I mostly look at companies and then the mechanics thereof, but pretty much every digital business or every business going digital, depends on the digital infrastructure that’s been put in place. So I keep an eye on sort of Huawei, Ericsson, Nokia, and a couple others to sort of get a sense of what’s coming next and where things are now. And then… you know, how is this gonna play out? Is anyone gonna get disrupted? Are we in a new entrance and so on? And within that China, Asia, I mean, it’s really Huawei is the company to look at. And also I think it’s in its own right, it’s a very interesting company. It’s a shame it’s not publicly listed. I would have been looking at that stock a long time ago. I’ve been probably studying this company for 10 years now in various forms. So I keep an eye on them, I think that’s interesting. Anyways, that’s kind of the point of today’s talk about where digital infrastructure is going next. If you’re in Asia, that’s mostly a Huawei story, plus the carriers and things like that. But the equipment comes from them, then the carriers, then the cloud companies and so on. So that’s kind of the topic for today. Let me talk quickly about sort of 5G in general. I mean, 5G is… It’s been this slow, steady, and very important rollout. But it wasn’t like 4G, and really 3G and 2G. I mean, they kind of hit with this killer use case on the consumer side, so everybody knew when 4G landed. It’s, oh my God, we can all get streaming video on our phones now. I mean, there was some really sort of killer apps on the consumer side. So they got up into tension. And then… We never really had that with 5G. This was always the question of like, what’s the killer use case for 5G? And it’s like, well, there isn’t one in that sense. It’s more like this slow, steady rollout, which is mostly about these tools being adopted by industry, which takes longer. B2B is always longer than B2C. And really B2G, you’ve got government in adoption as well. But. You know, we’re four years into commercial use of 5G. The numbers in China these days, according to China Mobile, the CEO was at the conference. You know, 630 million subscribers in China, 4.7 million base stations, about 60 to 70% of the users in country have 5G now. And the numbers are pretty similar in other countries in Asia. The leaders, as far as I can tell, are Thailand, South Korea, and China. So it’s this, on the consumer side, things have been moving along at a steady clip. But that’s not where the Big Bang is. The Big Bang, let’s say the big impact, not Big Bang, it’s on business and industry adoption. I mean, it is like deep. digital transformation of factories, of cars, of transportation, of smart grids, of power, of energy. That’s where this is all playing out and that’s sort of a slow steady process. One way I heard it described by, it was a Huawei person at their R&D center in Shanghai and he basically said 4G, 3G, 2G were all about communications, upgrades of communications. 5G is sort of about the real world. It’s about putting sensors in everything. It’s about connecting everything, but it’s much bigger than just communications. It’s society, it’s the real world, it’s industry. So that’s kind of the important side. Now that said, on the consumer side one of the things we are getting is a nice big upgrade. in various types of social media and entertainment and especially video. It was interesting now that we’re a couple years into it and people tried to predict what were going to be the hot use cases. It was really augmented in virtual reality is what people were talking about for 5G for a long time. But we don’t really see much adoption of that, not really, but an area that did get pretty good adoption was short videos. which is kind of interesting. I didn’t see, I don’t think anybody saw that coming. You know, carriers that put in 5G, they saw, you know, the number I heard was 30% jump in terms of short video usage. So it turns out people watch a lot more videos. So that’s at least something, but we didn’t really see it in the AR VR world. Okay. That’s sort of teeing up 5G. Let me sort of talk about the conference and then 5.5G. The start of the conference for me was, there was a Huawei event where chairwoman Sabrina Meng, Meng Wanzhou, she gave the presentation and it was great. It was really great. You know, she’s obviously been in the news a lot the last couple of years, the whole thing in Canada and so on, but she’s back and she was appointed chairwoman, rotating chairwoman. They usually have three chairpeople they rotate at Huawei, which is interesting. I’d heard her speak before, but this is the first time she was really talking details. There were a lot of slides. I’m gonna send those out in emails in the next couple of days. So I’ll put up the slides from the presentation, but it was kind of, it was exactly the type of presentation I like, which is, you know, deep detail on what they’re actually doing and their strategy as opposed to sort of high level results. So, okay, so what does this look like? 5G and that’ll tee up 5.5G. Where are the use cases that matter? And she basically listed about four, four to five. First one which was interesting was shopping experience. That it’s gonna change how people shop or it is changing how people shop and it’s changing how merchants behave. I thought that was interesting. I’m not totally convinced about this. Basically the idea was people… historically shopping, buying by consumers, you know, you study what consumers want and what they need. And that’s probably her argument is that’s not gonna be the future. The future is gonna be about interactive experiences are gonna be the defining aspect of consumption. Not I need bread and I need milk, those are my needs. And I also like movies, those are my wants. No, interactive experiences. that are constantly on and there’s constant back and forth between you and merchants and shopping sites and businesses. That’s gonna be how shopping happens. Okay, I’m kind of on board with that. And therefore consumption is gonna change and merchants are gonna change their behavior in response instead of going for scale and then outspending your rivals on marketing spend and other things, you know, buy our bread, here’s our new movie that’s being released. you know, you go for scale and then you use your money and your retail depth to drive purchasing behavior. Her argument, or at least her statement was, it’s now gonna be much more focused on product quality. Because high quality products are gonna benefit from word of mouth on social media and other places as opposed to this brute force marketing push. It’s gonna be much more about product quality and. Thrilling your customers is the phrase I’ve been using. So I’ve kind of been on board on that for a while. I’ve cited companies like Coupang and Xiaomi as examples of companies that continually focus on thrilling their customers. It’s gotta be a 10 out of 10. It can’t be a five out of 10 with a lot of marketing behind it. It’s gotta be a 10 out of 10. Oh, and by the way, that’s just last month. What do you have this month? We need another 10 out of 10. and then social media and word of mouth will take care of that. Okay, so she talked about that. I’m pretty much on board with that. This idea of new types of social media based on augmented reality, based on 3D interactions, which I’ll talk about, that in theory is doable with 5G, but we haven’t seen the apps yet. So in theory, they could emerge. The one that I really, there’s probably two that I really agree with, and this is one of them, which is video. video everywhere. And not just video like you have it on your phone, there’s a little screen on the subway. No, video is absolutely everywhere. Screens everywhere and they’re interactive in real time. So this is kind of like that movie Minority Report where Tom Cruise is walking through the subway and every screen he walks by recognizes him and says, hey, I don’t remember what the name of the character was. You know. new thing for you, how are you doing? Like this sort of immersive digital screens everywhere in the physical world. Everywhere we go there will be screens everywhere, they’ll have tremendous bandwidth and speed and they’ll be pumping videos all the time and it’ll be interactive. They’ll hear what we say, they’ll respond to us and so on. I basically believe that’s happening, like I think that’s absolutely going to happen. Next one is you move into sort of industrial use cases, which Huawei refers to as 5G 2B, instead of B2B, 5G 2B. Yeah, I mean, I’m a believer in this. This is the sort of slow, steady burn that we’ve been seeing where, you know, 5G capability, which is IoT, it’s sensors, it’s cameras, it’s autonomous vehicles, it’s robots. This is getting embedded into every aspect of production. So it’s in manufacturing, it’s in transportation, it’s in energy. Yeah, I mean that’s basically happening. It’s just happening kind of slow. There was a case study I looked at a couple weeks ago about smart mining, where you know, basically you sit in a booth on the surface and you control the mining equipment down below. You know, that’s 5G applied to mining basically, plus robotics. So it’s usually three things. It’s sort of edge computing and devices and robotics. It’s the connectivity, that’s 5G, and then it’s cloud. That all works together. one person doesn’t have to go up to the top of a construction crane and sit in that little booth, which they seem to fall over on a regular basis, which I don’t understand. No, you sit in a little cab on the ground in a cockpit, and you can control three, four, five different cranes at the same time because you have real-time connectivity. Okay, so that’s kind of the biggest story here. There was one thing that I thought was really interesting. When you talk about sort of… 5G embedded in production manufacturing really business B2B B2G. Something people always cite is increased flexibility and I never really kind of understood what that meant was that like okay we make one sweater and then we make a different sweater then we make a different sweater which is kind of what Alibaba talks about or and then the thing that convinced me is I saw a model I’ll put the video of this model in one of the emails And it was basically a factory where everything is module, everything is modular and on rails. So instead of a factory with lots of machines and it goes down the rows, which is how most factors work, all the components in the factory are modular and they all can move around on the floor and create new configurations to make other stuff. I’ll put a video of this, but that was pretty impressive. You can see that in logistics for sure already, but this would be a factory where all the component robots and stations where things are done, or they just sort of move around the floor and they can configure themselves in different ways to make different things. That’s kind of interesting. Okay, that was kind of the presentation by the chairwoman. Pretty much on board, that’s, I would characterize all of that as. That’s what 5G kind of looks like now that the dust has settled. You know, we can see what’s actually being done as opposed to what was speculated on. You know, we’re four years into it. Okay. Let me get to sort of the main point here, which is 5.5G. If that’s 5G, how is 5.5 different? And it looks like this is rolling out in 2024. Everything’s being tested right now apparently but I think we could see significant rollout in about six months. Okay so what is 5.5G? People are already talking about 6G but this you know that’s an entirely new thing. 5.5G is really just an upgrade of 5G. They’ve added some higher wavelengths which get you more speed. more bandwidth, lower latency, but anytime you move up in wavelength, it doesn’t go through walls nearly as well, it doesn’t go as far. So if you’re gonna go from 5G to 5.5G, it means you’re gonna put a lot more sensors and routers out there to keep it going. So it’s not something you’re gonna do everywhere, you’re not gonna take your whole 5G network and turn it into 5.5G because you’d have to deploy lots of base stations, lots of sensors and all of that. No, it’s more targeted. We may put 5.5G capability in certain situations, in certain locations where the boost in speed and other things will make a big difference. And in those cases, we would have to put more base stations. So it’s more of a targeted selective upgrade in certain situations and scenarios. And I’ll give you the short list. But 5.5G, it is a big jump in speed. I mean, it’s, let’s say if 5G itself download speed about one gigabit per second, this goes up to 10 to 11. It’s a 10-fold increase in download speed. Upload speed, about the same. It goes up by about a factor of 10. So suddenly your upload speeds of one to two gigabit per second download is 10 to 11. I mean, that is blazing fast. tenfold and 5G was already a very big upgrade in terms of speed from 4G. The other point that was sort of made over and over was 5G is communication. 5.5G is communication plus sensing ability, sensing capability. So if you put this on the road, it can communicate with the car. Fine. It can also communicate with people walking around, streetlights, parking lots, any sensors that have been put in the roads, any IoT devices put around the lake, video, all of it. It can go back and forth and basically communicate and sense what’s going on at the same time. That turns out to be a pretty big deal in one of the use cases, which is vehicles and transportation in particular. Anyways, okay. So here’s the one, two, three, four, five use cases that were discussed. And I’ll kind of tell you the ones I’m excited about. So we look at just what are people gonna do with this, consumers, regular people, couple of use cases in there that weren’t terrible. They were fine. It’s like you want high definition on your phone to do video calls on Skype or Zoom. Fine, you can do that. Not a huge thrill. You can do virtual reality, of course. That’s still highly dependent on people, not just people adopting the virtual reality headsets, but you’ve got to get people to build apps for these things. I mean, in theory, this is why the Apple VR headset could be a big deal. It’s one, it could get people to use it, and two, if anyone can get developers to start writing stuff that run on VR sets, it would be Apple. I mean, they’ve already got their ecosystem and there are hundreds of thousands of developers all building stuff for the app store. Still a question mark. Okay, the two that I thought were interesting in terms of stuff that people would use walking around. Number one was the cloud phone, which is, I mean, as far as I understand, yes, it’s a smartphone, but pretty much all the power is up in the cloud. So… It’s a pretty cheap handset that does everything that a high powered handset could do. It’s kind of like a Chromebook. You know, it’s a very budget laptop, but you can draw on all these capabilities in the cloud, access them quickly, so it works very, very well. So Cloud Phone would be something like that. Kind of interesting. The one that was probably got the most attention though was 2G to 3, I’m sorry, 2D to 3D content creation. And this is basically doing something in 2D. So you take out your phone and you do a live stream staring at your phone. That’s a 2D image. It takes that into the cloud. It uses generative AI and it turns that into a 3D presentation that can be watched on a laptop. It can be watched on a smartphone. And they had these set up and it was pretty impressive. It’s… It’s basically like wearing 3D glasses at a movie theater, but you’re not in the movie theater and you don’t have glasses on, you’re just looking at your laptop. And the screen you’re looking at is in 3D. Now you have to be sitting in the right place and the camera has to look at your eyes to tell where you’re looking so that it can render a 3D image in real time. But that was pretty neat. They were calling it AIGC, AI Generative Content. but it’s basically 5G capability because you really need blazing fast speed to get that image in 3D on a laptop or a phone, but you also need the generative AI capabilities in the cloud, and it all has to be done in real time. So the use case for live streaming was pretty awesome. I’ll put some videos up again in the next couple of days of. you know, live streamers who are basically just talking into their iPhone and it’s showing up on laptops in three dimensions. That was pretty cool. And apparently there are 3D smartphones coming too, where you can look at the screen and it’s in 3D. I didn’t see those, but I definitely saw the laptops. They were pretty impressive. So that was kind of an interesting use case. Will it take off? I don’t know, but yeah, I would look into that. So that’s kind of the first bucket is consumer applications, cloud phone, and then 3D content creation in real time was pretty cool. For home cases, this is kind of the same thing, you know, smart home, it’s just a lot faster, kind of interesting, you know, 5.5 is so fast, you could get away with not having an internet connection in your house, you could just pull it directly from mobile. That’s kind of cool. Not sure if it’s necessary. Fine. No, the next compelling one was connected vehicles. Connected cars, connected bicycles, trains, trucks, all of it. And this is where I think China is, if I was going to bet where I think China is going to surprise the world next, I think this is where it’s going to be. Because in a lot of countries, we’re seeing smart, intelligent, connected cars moving around the road. Fine. In Chinese cities, we’re starting to see everything on the road be intelligent and connected, not just the car. So the street light is connected, the cameras on the roads are connected, every car is connected, the parking lot is connected, everything. And you can lay fibers underneath the road. All of that will operate as one system in China. This is where you start I’m not sure we’ll see this in any other countries, at least in the near future. Maybe the couple, but somewhere like California, where I’m from, I mean, they can’t build a road. They’re not really known for the ability to deploy infrastructure. So we’ll see lots of smart Teslas on the street, but we’re not gonna see entire cities getting rewired and all connected under one system. That will be a China story probably, maybe a couple other places. So that use case got my attention and we actually went around in a bus around town that was connected and watching its download speeds in real time. And it’s got some interesting sort of, as soon as you get into all this mobility stuff, it’s actually kind of interesting because you start looking for situations where this will be useful, like parking lots that are underground. Well. You know, it’s hard to get good connectivity underground, but this you can basically beam it underground and that’s good for finding parking lots, blazing fast internet in tunnels, on the metro, out on boats. And the one that kind of surprised me was in the air. I think they’re setting it up so as your plane is landing, you don’t need to wait for it to land to turn on your phone. It’ll pick it up as soon as you get close to the ground. So I’m not sure that’s terribly useful, but I thought it was cool. Anyway, so that was the other one. Probably the last one is this idea of, okay, you start to deploy this to industry, right? That’s the big use case, as I’ve been saying. Smart grid, smart ports, smart factories, smart hospitals. This is kind of what most I spent. a good three or four hours walking through the entire convention center. And this is really what people were showing was, look, we all know who’s going to deploy the connectivity. That’s going to be China mobile in China, Unicom. And we kind of know where they’re going to get their equipment. That’s going to be mostly Huawei ZTE to some degree, but what is going to be built on top of that? That’s not a consumer electronic device, an industry device. Well, that’s what the whole conference is full of companies building stuff. on top of this digital infrastructure, everything from robots to sensors in factories to drones that can check your power lines. And if you’re looking for maintenance checks on tall buildings, instead of having some dude hanging off ropes on scaffolding, you just send the drone up. So that’s kind of where most of this conference is. If you wanna see all the consumer devices, you go to CES in Las Vegas or something, it’s all full of consumer applications. This was all sort of industry applications. Fairly impressive, but again, sort of a slow rollout. And those were kind of my notes from the meeting. I guess there’s, you know, the key takeaways for me would be that one, 5G is really important. It’s not a sprint, it’s not a big bang like we saw with 4G. This is more of a long marathon, but it’s far more transformative. It’s going to have a much bigger impact, but it’s sort of, you know, steady and gradual. So the key thing is to watch for adoption and which industries are adopting, which companies are adopting, you know, the digital leaders versus the laggards, whether it’s a manufacturing company, whatever, are going to start to do some pretty incredible things. So that’s kind of point number one. 5G is a big deal. Number two, 5.5G is coming much faster than I thought it was. I suspect Huawei and maybe China in general are trying to really leapfrog and pull way out front by, they’ve been pushing the deployment of 5G very, very quickly in Asia and in China in particular. This looks like another attempt to sort of pull further and further ahead. And it’s a big upgrade in terms of speed and capabilities. That’s sort of… Let’s say takeaways one and two. Takeaway three, obviously the big use case that matters is industry. The two areas I’m looking at are transportation, which could be a sea change in how cities work, and then production and manufacturing. With manufacturing being more flexible, we probably are gonna see completely new methods of production. So those are the two big use cases. The third use case, which is not industry, is the consumer one, which is, I don’t know, I just call it videos everywhere. Screens absolutely everywhere, and they’re all interactive. And that’s gonna make the real world look very different than what we’re used to. That kinda gets you back to O.M.O., this idea that we’re gonna bring the digital world into the physical world. on every street, on every shopping mall, in every store, everywhere. And I think screens are how that’s gonna happen. So that was sort of the third case I was looking for. So transportation, manufacturing production, and then sort of screens everywhere. In terms of fun stuff, the 3D laptop was really quite cool. It was really compelling. I could see it at live streaming in 2D and then. transforming it into 3D. That could be, can I, I’ve never been 100% on board with 3D, it makes my eyes a bit tired. But maybe, I mean it was pretty cool. And yeah, that’s probably fun just to check out. You can go online and find that. And it’s worth taking a look. But those were kind of my three to four takeaways from the event. I hope that is helpful and that’s kind of the content for this week. I’m actually, I’m kind of rushing around, so I’m doing this on the fly. I just got back from Shanghai and I’m heading out to Stuttgart tomorrow. So I’ll be there just a couple days and then it looks like I’m going to be in sort of Eastern Europe, maybe down to Italy and then probably the whole summer in Europe. So that’s pretty great. I’m actually really looking forward to it. So yeah, it’s a bit of a short podcast today. I got to pack stuff up for the month and head out. Anyways, that is it for me. I hope everyone is doing well and I will talk to you next week from probably Belgrade. We’ll see. Anyways, take care, bye bye.
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