Emergence of 5G With Huawei Leading The Way

Huawei leading the 5G revolution

In the past decade, the 4G network completely changed how we consume information and we saw an emergence of the mobile app industry becoming a new norm. The 5G is going to supercharge user experience with smart homes, autonomous driving, cloud control, and numerous such possibilities becoming the new norm. Companies like Ericsson and Qualcomm led the 4G revolution, yet how did Huawei emerge as the frontrunner in the 5G race?

Crux of the Matter

What is 5G?
5G is the next step in mobile technology, which will expand the mobile ecosystem to new industries bringing in more connectivity between people and things. It is a more important jump from the last generation than 4G was to 3G and 3G was to 2G primarily because it will be a unified connectivity fabric that will connect virtually everything around us.

Currently, the problem with 4G is not its technology, it is the networks and the data that are needed are not ready. For instance, Virtual reality, in order to achieve true immersion, needs several hundred gigabits of data, which 4G cannot do wireless right now. With low latency, 10x times download speed, virtually unlimited capacity, 5G will meet diverse Internet of Things (IoT) requirements and enable next-generation user experiences, empower new deployment models, and deliver new services.

According to recent estimates, by 2035, 5G will drive global growth with $13.2 trillion of global economic output, 22.3mn new jobs, and $2.1 trillion in GDP growth. 5G has superior reliability and thus will impact every industry, making safer transportation, remote healthcare, precision agriculture, and digitized logistics a reality.

In India, the concept of smart cities has been established and the 5G network will transform the lives of people living in them by providing greater efficiencies in traffic management, garbage handling, automotive safety, infrastructure, etc. According to the Ericsson Mobility Report 2019, in India, 5G subscriptions are expected to become available in 2022 and will represent 6% of mobile subscriptions at the end of 2024.

If 4G tech built us a road, then 5G tech will build a city.

Wang Xiaoyun, General Manager of Technology at China Mobile

However, only 10 years after the launch of 4G, the world is preparing for the next generation but it comes with high-cost investments in infrastructure by the mobile operators and thus to maximize the returns they need to understand how network infrastructure and the associated cost base will evolve over the next few years.

Role of Huawei in Leading 5G
Huawei Technologies Co. is a Chinese multinational founded in 1987 by Ren Zhengfei. It is the world’s largest supplier of telecom equipment and the number 2 producer of mobile phones. Huawei began researching on 5G way back in 2009 and due to which it has achieved remarkable feats from standardization to global tests and from commercial trials to commercial applications.

It secured polar coding before competitors, introduced the first network splicing router, and has 3GPP standards for eight key technologies, including soft NR architecture, and uplink, and downlink decoupling. Huawei produced the world’s first ASIC chip based small CPE and IPTV@5G with a speed of 2Gbps.

Enabling next-generation of communications, the Balong 5000 which is the first 7nm multi-mode chipset is a stepping stone into a wider field of cloud control and IoT possibilities. In terms of technology development and overall system performance, there is hardly anyone that can compete Huawei.

We estimate that 29 billion devices will be connected by 2021, and 5G will provide the road on which everyone will travel through digitally.

Qiu Heng, President of Huawei Wireless Marketing Operations

According to a 5G patent report published by IPlytics, Huawei ranks second only to Samsung in terms of the number of 5G SEP patents, while it stands first in technology contribution to 5G standards. Huawei with its extensive cooperation with more than 186 industrial partners and 45 collaboration projects across the world has emerged as the only company in the world that offers 5G end-to-end products and solutions.

As telecommunication giants that provide networking services to more than 170 countries around the world, Huawei was among one of the world leaders in rolling out 3G and 4G but in the case of 5G, it is likely to lead the way.

  • Ren Zhengfei is a Chinese entrepreneur and engineer. He is the founder and CEO of Shenzhen-based Huawei, the world’s largest manufacturer of telecommunications equipment. As of 2019, he had a net worth of $1.3 billion.
  • The China-United States trade war is an ongoing economic conflict between China and the United States. President Donald Trump in 2018 began setting tariffs and other trade barriers on China with the goal of forcing it to make changes to what the U.S. says are “unfair trade practices”. Huawei was also restricted from doing commerce with U.S. companies due to alleged previous willful violations of U.S. sanctions against Iran.
  • On March 6, 2020, the first-ever all-5G smartphone Samsung Galaxy S20 was released. On March 19, HMD Global, the current maker of Nokia-branded phones, announced the Nokia 8.3, claimed as having a wider range of 5G compatibility than any other phone released to that time.

RBI’s New Banking Reforms

Covid-19 has crippled the global economy and it is inexorably headed to a recession wherein central banks have to answer the call to the frontline in defence of the economy. This crisis is likely to shift scenarios and provide new dimensions to the economies and bring banking reforms worldwide.
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Crux of the Matter

India has a history of bringing in reforms during the periods of crisis and following the pandemic, the Reserve Bank Of India is making unprecedented monetary and regulatory banking reforms to provide relief and ensure liquidity funds flow to the affected sectors.

RBI reduced the repo rate by 40 basis points or 0.4% to 4%. The reverse repo rate stood at 3.35%. Moreover, it extended the moratorium on term loans by 3 more months till 31st August. RBI has announced other measures in four broad categories: Measures to Improve the Functioning of Markets, Measures to Support Exports and Imports, Measures to Ease Financial Stress, and Debt Management.

Firstly, a refinancing facility for Small Industries Development Bank of India (SIDBI) for funding requirements of the MSME and secondly, Investments by Foreign Portfolio Investors under the Voluntary Retention Route (VRR) shall offer operational flexibility in terms of instrument choices and certain regulatory exemptions. These market improvement measures are intended to ease constraints on market participants and channel liquidity to various sectors of the economy.

Under the second category, the RBI has increased the Export Credit from 9 months to 15 months and also provided an extension of time for payment for imports. Along with that, RBI will also be providing additional assistance and liquidity facility for Exim Bank Of India in order to promote international trade.

The third category is the most important as it will mitigate the burden of debt servicing, prevent the transmission of financial stress to the real economy, and ensure the continuity of viable businesses and households. RBI has permitted a 6-month moratorium on all term loan installments and it has also allowed a deferment of interest on Working capital facilities. The RBI will also undertake Long Term Repo Operations (LTRO) which will allow additional liquidity with the banks.

The central bank has further brought in changes in the Asset Classification, Resolution Timeline, and the Group Exposures under the Large Exposures Framework to ease financial stress. Finally, for effective debt management: guidelines have been relaxed in the Consolidated Sinking Fund (CSF) of state governments.

Global Financial Crisis of 2008
The bankruptcy of Lehman Brothers in the US unfolded the Global Financial Crisis in 2008. It was understood that there is a high amount of risks involved when banks give loans of the entire value for a property assuming that the cost will rise and it will be easily repaid. When a number of banks did so, the banking sector and the economy saw the consequent effects leading to the global crisis.

The Indian banking sector remained largely unaffected but India was compelled to shift its credit demand from external sources to the domestic banking sector. Even though India’s financial system was less developed at that time; it did face serious consequences as the crisis led to the sharp decline in exports and fall of GDP to 6.72% in 2008-09 from 9.32% in 2007-08, giving rise to the expansion of fiscal deficit and extensive Public sector lending.

Due to lack of a framework for bankruptcy, India faced a risk of a large private sector bank going bankrupt with no legal way of dealing with it other than to force a public sector bank to buy it out, an approach that generally weakens the banking system. A number of expert committees recommended banking reforms, changes in regulations, and new frameworks like the Indian Bankruptcy Code. However, following different political scenarios and the legislative framework they could not be brought in which lead to the crisis of NPAs.

NPA Crisis
The 2008 crisis laid the foundation for much of today’s non-performing loans which have plagued the Indian banking sector. A loan given by a bank is classified as a Non-Performing Asset (NPA) if the borrower has stopped making interest or principal repayments for over 90 days. As of 2018, the gross value of NPAs stands at Rs. 10.35 lakh crores, out of which 85% is of Public sector banks.

Post-crisis the public sector banks were under tremendous pressure to lend large amounts to steel, power, and infrastructure projects and the euphoric lending led to a rise in bad loans and the NPA crisis. A number of scams came to the forefront wherein businesses borrowed under shell companies to execute projects in other countries; later the foreign banks invoked guarantees and domestic banks were obligated to pay and they could never recover their money.

NPAs have lowered the bank’s profitability and made them vulnerable to adverse economic shocks and consequently put consumer deposits at risk. This also led to India’s Twin Balance Sheet problem, wherein both the borrower and lender i.e. corporate sector and banking sector come under financial stress.

Thus, to avoid the snowballing effects leading to insolvency and NPA crisis, liquidity management has been given a priority by the RBI while bringing back normalcy in financial markets post Covid-19.

  • The Reserve Bank of India, which was established on April 1, 1935 during the British Rule, modeled its official emblem after the double mohur of The East India Company. The logo originally featured a sketch of the Lion and Palm Tree but it was later decided to replace the lion with a tiger to represent India better.
  • Ex RBI governor, Raghuram Rajan predicted the 2008 financial crisis in 2005. In his 2005 paper titled ‘Has Financial Development Made the World Riskier?’, Rajan predicted that a financial crisis is in the making and going to hit the economy in the next 3-4 years.
  • The oldest continually operating bank in the world is Banca Monte dei Paschi di Siena, which has been operating as a bank in Italy since 1472. The bank is on record as the first official bank in the world, although the practice of banking has been traced back for several centuries.

The Aatmanirbhar Campaign Paves Way For Multidimensional Reforms

Following the PM’s address, the Finance Minister put forth a post-Covid vision through a number of structural and long-pending reforms for the revival of the Indian economy which has taken a deep hit following the Coronavirus pandemic.

Crux of the Matter

PM Modi said in his speech, “Covid-19 has brought an opportunity for India” and the sectoral reforms that followed in the stimulus package for all sectors and businesses seem to not only help to revive the economy but also revolutionize and upgrade the Indian markets to international standards.

One Nation One Ration Card
In the present system, a ration cardholder can buy foodgrains only from an FPS that has been assigned in the nearest locality. However, the ‘One Nation, One Ration Card’ system will identify a beneficiary through electronic point of sale (ePOS) device through which even if the person migrates to another state/town will be able to buy subsidized foodgrains without any hassle.

Technology Reforms in Education
‘PM eVIDYA’ program has been launched for digital education across India. Also, in a first, an initiative for psycho-social support for students, teachers, and families for mental health is launched by the name ‘Mandorpan’.

National Foundational Literacy and Numeracy Mission to be launched by December 2020, will ensure that every child attains learning levels and outcomes in grade 5 by 2025. New National Curriculum and Pedagogical framework for school, early childhood, and teachers have been announced. 

Fast-tracking Investments
Project Development Cell in each ministry will coordinate with investors to bring in new investment-likely projects to boost local employment. Promotional incentive schemes to attract investments in new sectors like Solar PV manufacturing, advanced cell battery storage to be launched soon.

States will now be ranked on the basis of Investment Attractiveness to develop healthy competition in the country. Also, Investment clearances will be made fast-track through the Group of Secretaries (EGoS).

Coal & Mining Sector
Ending the central monopoly, the FM announced the deregulation of the coal mining sector. To increase coal production and reduce import dependency, the government will increase the private sector participation in the coal businesses.

The government will increase competition by replacing the regime of fixed rupee/tonne by revenue sharing mechanism. Now any party can bid for a coal block and sell it in the open market. Entry norm will be simplified and 50 coal and 500 mining blocks will be offered immediately with no eligibility conditions.

Coal Gasification/Liquification will be incentivized through rebate in revenue share which will now help reduce environmental impact and switch to a gas-based economy. A massive investment of Rs.18,000 crores for mechanized transfer of coal via conveyor belts to railway siding has been proposed. Coal bed Methane extraction rights will now be auctioned from Coal India Limited’s (CIL) coal mines. For further ease of doing business a Mining Plan Simplification will be implemented which will be loaded online.

Reforms in Agriculture
Essential Commodities Act will be amended which will pave the way to deregulate agriculture food items including cereals, edible oils, oilseeds, pulses, onions, and potato. The stock limit will only be imposed under very exceptional circumstances like national calamities, famine with surge in prices.

A central law will be now in place to provide adequate choices to the farmers to sell their crops at lucrative prices through barrier-free inter-state trade. A framework for e-trading of agricultural produce will be brought into effect.

The Government will finalize a facilitative legal framework which shall enable farmers to engage with processors, aggregators, large retailers, and exporters in a fair and transparent manner. The framework will provide for risk mitigation, assured returns, and quality standardization for farmers.

For better price realization to farmers ‘Operation Greens’ which is run by the Ministry of Food Processing Industries will now be extended to all fruit and vegetables and further also provide a 50% subsidy on transportation from surplus to deficient markets, 50% subsidy on storage, including cold storages.

Reforms In Labour Laws
The government has announced its future plans of reforming the current 44 labour laws and bringing it down to only 4 labour codes. The bill is currently in the parliamentary standing committee and will soon be introduced in parliament.

The projected pipeline in this sector includes universalization of right to minimum wages and timely payment, appointment letters, annual health checkups, extension of ESIC coverage, and occupational safety and hazard Code.

The Prime Minister believes that self-reliance will prepare the country for tough competition in the global supply chain, and it is important that India wins this competition to emerge as a global leader.

  • A stimulus package is a package of economic measures put together by a government to stimulate a floundering economy. The objective of a stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending.
  • The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is a law meant to address the economic fallout of the Covid-19 pandemic in the United States. This legislation was the largest-ever economic stimulus package in U.S. history, amounting to 10% of total U.S. gross domestic product.
  • During the 2008 Global Financial Crisis, the Indian government’s stimulus package was around Rs 30,700-crore, mainly comprising additional spending and excise duty cuts aimed at boosting consumption. The package aimed at steering the economy during a slowdown due to the recession.

M&E Sector Hopes to Bounce Back

While most of India is under COVID-19 lockdown, the Indian Media and Entertainment (M&E) Industry which includes a wide spectrum of activities and audience base that has multi-media consumption is facing the most harsh and unprecedented time. However, the industry’s landscape seems to be shifting to online media consumption with surge in viewership of television, OTT platforms, gaming platforms, etc.
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Crux of the Matter

The media and entertainment (M&E) sector in India is estimated to have valued at ₹1,631 billion in FY19 and grew at a CAGR of 11.5%. The M&E industry is a close-knit structure wherein each one is inter-dependent. Due to the pandemic induced quarantines, the media consumption has massively increased and a survey conducted by McKinsey and Company shows the expected behavior changes in Indian media consumers.

During the lockdown, certain segments of M&E are seeing consumption growth whereas, on the other hand, outdoor consumption models are seeing a dramatic fall.

Newspapers are recognized for high credibility especially in today’s times of social media. Due to the complete lockdown, newspapers were forced to close down production and stop their distribution to control the virus. As a result, nearly 80% of the revenue which comes through advertising has come down nearly to zero.

The Times of India, the world’s largest English-language newspaper is struggling to adapt to these times of crisis and has shrunk to only 16 pages from 40. They are dropping online paywalls and offering free PDF versions of the print edition to try to keep their audiences intact. Even The Indian Express has announced deep wage cuts and also asked the Finance Minister for a two-year tax holiday and the removal of import restrictions on newsprint.

Those newspapers who already have an established digital presence are slightly benefiting and reaching out to wide demographics and also trying to build new customers. But none of this seems to help them earn revenues at a time when the economy is hard-hit and advertisers shift to TV and online advertising.

Good Days for the OTT Industry
The film industry which was once considered recession-proof is now facing unprecedented losses due to the Coronavirus outbreak. Across the world, movie theaters are shut, film festivals have been canceled, movies which were in production or post-production are delayed, future releases are postponed, all of which have resulted in huge losses, mass layoffs, and salary cuts for thousands of workers and employees.

If the lockdown has benefited any medium then it is OTT. OTT stands for ‘over-the-top’, meaning delivery of TV and film content directly via the Internet. It has undoubtedly registered a spike in new consumers as it is hugely benefitting from the shutdown of cinema halls. Netflix and Amazon continue to rule the OTT market with Disney+ entering as the new competitor. Some of the filmmakers are now making and releasing movies exclusively on the OTT as it not only cuts down on a lot of overhead costs but also provides a ready viewer base.

Online Gaming
Closure of major sporting events has led to alternative e-sport formats gaining visibility. More brands are exploring this as an alternative revenue model. Streaming platforms and game publishers are benefitting as people are buying, playing, and watching more video game content.

The global viewership has increased by 10% on Twitch and 15% on YouTube Gaming. Verizon reported that US domestic peak-hour video game usage was up by 75% in the first week of quarantine. There is also a significant growth in mobile games like LudoKing, PUBG, Candy Crush whereas apps like Dream11 have fallen apart.

With more stay-at-home mandates being issued around the world and the entertainment industry finding new ways to migrate their offerings to live-streaming platforms, we expect to see these numbers rise.

Doron Nir, Chief Executive, StreamElements

A lot of Out Of Home (OOH) advertising and sponsorship deals have been negatively affected as live events like Wimbledon, IPL, Tokyo Olympics, etc. have been postponed. The cancellation of sporting events has forced sports broadcasters who thrive on live content to resort to showing archived re-runs of tournaments and world cups which has surprisingly resulted in a 21% surge in sports viewership according to the recent data revealed by BARC-Nielsen.

‘Non-Prime Time is the New Prime Time’
The highest TV consumption numbers in the history of Indian television were reported as TV is the major source of news and entertainment for millions of people in lockdown. A joint report by BARC India and Nielsen reported that during March 21st-27th India’s total TV consumption grew by 37% to cross a record 1.21 trillion minutes. The average time spent per viewer increased from 3 hours 46 minutes in January to a whopping 4 hours 39 minutes per day.  The United States also saw an average increase of 11% in daily household viewership.

The pandemic is hitting hard the media sector which will witness a slowdown due to reduced overall demand and unprecedented losses. Although the full effect of the COVID-19 pandemic remains unclear it is expected that the M&E industry will bounce back and return to growth quickly once restrictions are lifted and the economy returns to full capacity.

  • The month of March 2020 witnessed an upsurge of 39% in global mobile game downloads. The Ad-Tech firm, POKKT Mobile Ads, has registered that there has been a 31% increase in ad requests globally thereby pushing the mobile gaming industry into a stronger growth curve.
  • Netflix on 2nd May announced that its latest release starring Chris Hemsworth and Randeep Hooda, Extraction is going to become its most-watched Netflix original film. The film will be crossing 90 million streams in the first 4 weeks after its premiere. The major reason behind the same is the global lockdown that many countries have been following.
  • As per an article by The Guardian, “Disney has been losing hundreds of millions of dollars in income from its theme parks and cruise liner businesses because of the pandemic.” Analysts have estimated that the company could be facing an 11-million fall in visitor numbers across its theme parks, at a potential cost of $500 mn.

Reversal of Globalization – Impact on Manufacturing

As countries continue to extend lockdowns to curb the spread of the virus, the manufacturing sector also continues to increasingly suffer from disrupted supply chains, collapsed global demands, closure of international trade routes, and corridors leading to a slowdown in production. Is the definition of globalization witnessing a paradigm shift?
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Crux of the Matter

What Should We Be Prepared For?
According to a recent study, the overall impact of COVID-19 on India’s economy is an estimated GVA loss of over 9%. The estimated impact on the Manufacturing sector is more than -6%. As seen in the chart below other sectors like Real estate, Construction, Tourism, Mining, Agriculture, etc also are estimated to have a major negative pushback due to the pandemic.

Source: Statista

As per the estimation by the United Nations Conference on Trade and Development, the COVID-19 outbreak could cause global FDI to shrink by 30% – 40% due to the downfall in the manufacturing sector. COVID-19 has brought us at a point where the world now needs to strike the right balance between national self-interest and global collective survival to face the never seen problems and challenges.

Reducing Dependency on China
While China is considered ‘the world’s factory’ and remains the leader in manufacturing, a slow shift in this after the coronavirus pandemic began in Wuhan in China. Evolving business practices, consumer demands, and other factors have many companies moving to other Asian countries for manufacturing.

Political tensions with China are leading to uncertainty in trade policies as a lot of countries are heavily dependent on China for a number of commodities like medicines, clothing, the raw material for electronics, smartphones, industrial equipment, etc. Many of the companies like Apple, Microsoft, Google are even planning to move out of China and shift to countries like India, Japan, Thailand, and Vietnam.

Migrant Workers and Unemployment Rates
The problems for the manufacturing companies would not come to an end as soon as the lockdown restrictions are lifted. This is because the sector heavily depends on millions of migrant workers and daily wage laborers who are either stuck or have returned to their home states and bringing them back is going to take a lot of time. So there will be a major shortage of workers once the lockdown is lifted up.

Following the nationwide lockdown from March 25, India recorded a historic unemployment rate of over 26% in the month of April 2020. Even before the pandemic, the Indian economy was going through a severe slowdown with a growth rate of a mere 4.7% in the last quarter of 2019. Now with the shock of the coronavirus pandemic India’s manufacturing activity reached a 4-month low in March 2020 disrupting all demand and supply chains.

The MSME Sector
COVID-19 is an unprecedented challenge for the Indian MSME sector which is regarded as the backbone of the economy, employing over 40% of the country’s workforce. With no production and drop in demand, the revenue generation for MSMEs remains on hold with a number of expenses that the companies can’t get their hands off such as salaries of employees, rent, bank interest, etc.

Even just before the pandemic, this sector was facing harsh challenges and now as the COVID-19 crisis unfolds, the exodus of migrant workers, restrictions on import/export, restrictions in the availability of raw materials, travel bans, and numerous such factors are only going to massively hamper the MSME businesses.

Coronavirus will not end globalization, but it is going to surely change it. Manufacturers will have to adapt to succeed. In these highly uncertain times where we still do not know how and when the virus would be contained, the manufacturing sector should get ready for tough times and a long recovery path ahead.

  • Theodore Levitt was an American economist and a professor at the Harvard Business School. He was editor of the Harvard Business Review, noted for popularizing the term globalization.
  • The Timeline of Globalization is divided into 3 phases i.e. Archaic Globalization (From the period of earliest civilization to 1600s), Proto Globalization or early modern globalization (1600-1800), and Modern Globalization (1800-present).