What Is Driving the Unique 5G Success in China and South Korea?

m rogers
M. Rogers

Summary Bullets:

  • China and South Korea are leading the world in adoption for 5G services on the back of heavy CapEx investment to deliver rapid coverage and next-generation speeds early on from launch.
  • Adoption is also being driven by the development of value-added services and use cases for 5G technology in both consumer and enterprise segments.

China and South Korea: Leaders in 5G

5G is now here.  Around the world, operators are in the midst of their network buildouts and device vendors are pushing 5G-capable handsets, tablets, and wearables to the market.  However, two countries stand out in the speed at which consumers and enterprise have adopted 5G services.  According to GlobalData’s mobile broadband forecasts, by the end of 2020, China and South Korea outpaced the world in 5G adoption with 26% and 24% 5G subscription penetration of the population, respectively, compared to the global penetration of 5% at the end of the same period (for more, please see: Global Mobile Broadband Forecast,” June 25, 2021).  This rapid adoption of 5G is beginning to help operators in these markets grow revenue from mobile services, with overall 2021 mobile service ARPU in China and South Korea expected to rise.

5G in China and South Korea is supporting both consumers and enterprises and even contributing to social welfare.  On the consumer side, new value and revenue streams for consumer 5G are being driven by next-generation content like AR/VR experiences, the ability to stream 8K anywhere, multi-camera views for live events, dedicated gaming networks, and new consumer IoT applications.

On the enterprise side, 5G networks are being deployed as an enabler for enterprise services alongside technologies like multi-access edge computing (MEC) and IoT platforms and industrial applications to support use cases such as industrial automation, AI video applications, drones, and smart city.  Often, these enterprise solutions are supported by a combination of 5G, IoT, and MEC.  China Mobile alone entered contracts to construct dedicated 5G networks for private industry with 470 enterprise customers in 2020.  The company claims these projects support 15 different industry segments and represent over USD 620 million (RMB 4 billion) in revenues.

Beyond typical consumer and enterprise services, 5G has supported the pandemic response in both countries, with hospitals being rapidly connected with 5G networks in Wuhan and telehealth for the elderly being delivered in South Korea.

What Is Driving Success?

For customers to see value from 5G services, 5G networks need to provide next-generation speeds alongside ample coverage.  To achieve this, operators in China and South Korea invested heavily in network CapEx.  For example, in South Korea, all three operators rapidly increased 2019 CapEx levels.  SK Telecom (SKT) totaled USD 2.5 billion (KRW 2.9 trillion), the highest since 2012; Korea Telecom was at USD 2.8 billion (KRW 3.2 trillion), the highest since 2013; and LGU+ was at USD 2.3 billion (KRW 2.6 trillion), the highest since 2012.

Meanwhile, in China, the three leading operators drastically increased their 5G CapEx.  China Mobile’s 2020 5G CapEx totaled USD 15.7 billion (RMB 102.5 billion), 57% of all CapEx and up from USD 3.7 billion (RMB 24.0 billion), 14% of total CapEx, in 2019.  Moreover, the combined 5G CapEx of China Telecom and China Mobile, which are sharing 5G infrastructure, totaled USD 11.3 billion (RMB 73 billion) in 2020, 48% of total combined CapEx, up from USD 2.7 billion (RMB 17.2 billion) in 2019 (13% of total combined CapEx).

The result is that South Korean 5G users have wide 5G coverage and experience truly next-gen 5G speeds.  For coverage in China, all provincial-level cities had 5G coverage by the end of last year.  Furthermore, data from the MIIT indicates that there were 720,000 active 5G base stations by the end of February 2021.  For South Korean coverage, capital city Seoul already has near 100% population coverage, while the rest of the country is expected to be at 90% overall population coverage for NSA this year.

The investment has also resulted in next-generation speeds for users.  For example, according to Ookla’s ‘Speed Test,’ the median 5G downloads speeds in Mbps for the three leading Chinese operators were 304.6 for China Telecom, 303.4 for China Mobile, and 292.0 for China Unicom in June 2021.  Meanwhile, in Seoul, the operators have been able to achieve speeds that rival some residential fiber broadband.  According to RootMetrics, 5G network download speeds for the operators in Seoul in H1 2021 (again, in Mbps) were 642.5 for LGU+, 604.9 for SKT, and 548.4 for KT.

Chinese and Korean operators have not only driven adoption of 5G services based on coverage and speeds, but have also been working to support both enterprises and consumers with new value services and use cases.  We will now explore two use cases from China and Korea, one supporting enterprise and one consumer.

Case Study B2B: China Mobile 5G Smart Mining

Background: The Shan Xi Hua Yang Group, an energy provider, wanted to digitally transform its mining operations.  The company had goals of increased automation, efficiency, and safety and a reduced carbon footprint at its Xinyuan mine.

China Mobile’s 5G Offering: In 2020, in collaboration with Huawei and other industry vendors across software, IoT, and specialty equipment, China Mobile delivered a differentiated 5G network, an on-site MEC solution, and a software suite to manage disparate systems.

Key use cases for the deployment include a real-time communications network connecting workers and equipment in the mine with those in the control center as well as remote control of mining equipment and the sensor and monitoring platform across video, equipment, and environmental sensors.  The solution was deployed at the site of the underground mine shaft and the aboveground control center.

Business Value: Through the implementation of the 5G network, MEC, and IoT systems, the mine was able to deliver a reduction in labor costs, a reduction in non-labor operation expense, and a decrease in equipment failures.  More specifically, the connection of mining equipment to the IoT sensor platform reduced device failure by 15% compared to the previous year.  Automation of certain surveillance tasks reduced the required manpower onsite in the mineshaft, increasing worker safety and lowering the cost of labor by around USD 770 thousand (RMB 5 million).

Case Study B2C: LGU+ AR/VR for 5G

Background: LGU+ was the third leading operator in South Korea prior to the launch of 5G networks in the country and wanted to differentiate its 5G services by offering value-add for consumers immediately, beyond improved download speeds.

LGU+’s 5G Offering: LGU+ invested in developing content services specific to 5G customers that leverage high bandwidth to deliver better experiences.  The 5G content experiences that can be accessed via various applications, with some coming free for subscribers and others with a monthly fee, include an AR shopping platform, an AR and VR content library including K-pop and sports content, and remote learning applications.

Business Value: While LGU+’s overall market share at end of April 2021 was 21%, its 5G market share is 23%, with overall service ARPU increasing since Q4 2019.  Other operators have also seen the value of providing 5G content to their customers, with both Chunghwa Telecom and AIS entering into agreements to purchase AR/VR content from LGU+.

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