What you need to know
After arriving late to the 4G game, Taiwan is determined to capitalize early on the next generation of mobile communication technology.
Taiwan has ambitious plans for 5G, a new mobile communication technology with faster speeds, greater capacity, and lower latency (transmission delays) than current network systems. Telecom industry watchers expect the official 5G standard to be announced in 2018, with full commercialization then likely to follow in 2019 or 2020. At that point, an estimated 100 million devices in Taiwan would be using 5G technology, processing data 100 times faster than 4G.
Analysts say Taiwan’s strengths in the integrated circuit (IC) and wireless local area network (WLAN) module industries make it well positioned to tap the new 5G market. “Our R&D capabilities in end-user devices and WLAN modules are most likely to help Taiwan gain market share in 5G, which requires convergence of different communications technologies,” says Jong Kuochin, an analyst at the state-backed Market Intelligence & Consulting Institute (MIC).
Taiwan is an ideal market in which to test 5G, says Jonathan Lai, head of the 5G Program Office under the Ministry of Economic Affairs (MOEA). “Taiwanese are early adopters of new technology and are avid users of the mobile Internet,” he says. Average data consumption per user in Taiwan has reached roughly 7 to 10 GB per month, well above the global average for 4G LTE networks, according to the Taiwan Association of Information and Communication Standards (TAICS).
To ensure that Taiwan can capitalize on 5G commercialization, the Executive Yuan in May approved a 5G development blueprint based on high-definition (HD) mobile entertainment, smart manufacturing, and mobile virtual reality (VR). The blueprint will “build close cooperation among industry, government, and academia,” Jong says.
Further, TAICS inked a partnership in March with the Next Generation Mobile Networks Alliance, which includes global telecom operators like Vodafone Group, T-Mobile USA, and China Mobile. The two parties have agreed to jointly promote 5G technologies once it becomes commercially available.
The government’s push to give Taiwan a role in 5G commercialization follows less successful efforts in earlier wireless technologies. Most notably, in 2007 the Chen Shui-bian administration made the fateful decision to support Intel’s WiMAX technology instead of the long-term evolution (LTE) option that eventually became the 4G standard. Betting on WiMAX cost Taiwan heavily, as it has trailed most advanced economies in the implementation of 4G and related telecom services. The lag has inconvenienced consumers and reduced business opportunities.
The government reportedly had hoped to upgrade Taiwan’s ICT industry by supporting an alliance between local manufacturers and Intel to develop the 4G standard. “The problem was that there was no back-up plan in the event that WiMAX did not prevail,” says a well-connected industry source who could speak only on the condition of anonymity. The source adds that Intel’s proposal looked attractive at the time, as the company promised to spend US$500 million from 2008 to 2013 purchasing WiMAX equipment from Taiwanese firms.
Bureaucratic paralysis later prevented the government from shifting gears and moving earlier to get behind LTE, says the source, noting that “there were definitely influential people inside the government who realized early on that that WiMAX was likely to fail, but nobody wanted to admit they had made a mistake.”
As a result, as the 5G era approaches, the government has changed its approach. Rather than backing any particular type of technology, it is focusing on where Taiwanese firms can contribute in the broader 5G field.
‘Critical minority role?’
During the 2016 Taipei 5G Summit held in March, TAICS chairman Jonathan Tsang told the audience: “We have to admit that Taiwan is an island with limited resources.” He said it would be “greedy” for Taiwan to expect to set the 5G technology standard, but that the island could still play a “critical minority role.” If Taiwan could have a 3-5% market share of the “intellectual property rights of crucial network systems,” it would be able to play a key role in the development of global 5G technology, he said.
MIC’s Jong also applies the “limited resources” description to the availability of TD-LTE spectrum in Taiwan. “Without enough TD-LTE bands, Taiwanese network communication suppliers are unable to do 5G trial runs and have no choice but to conduct trials elsewhere,” he says. “The lack of sufficient spectrum bands is likely to prevent Taiwan from becoming a major player in 5G.”
By contrast, Jong expects Korea and Japan to play driving roles in shaping the 5G landscape. He notes that both nations plan to commercialize 5G services during the respective Olympics they will host: Pyeongchang for the Winter Games in 2018 and Tokyo in 2020. “Korea and Japan have been moving aggressively in 5G commercialization,” he says. “Conducting trials of 5G services during the Olympic Games will give them a better chance of surpassing other countries in the 5G field,” he says.
In June, Korea Telecom and U.S.-based Verizon announced they would work together to develop 5G technologies and establish global standards. In a statement, the two companies said they would jointly develop new network technologies such as software-defined networking (SDN) and network function virtualization (NFV).
With SDN and NFV, telecom operators are able to focus on software and server-based infrastructure rather than traditional hardware-based network equipment.
Meanwhile, South Korean electronics giant Samsung is intent on becoming a leader in 5G, observes Lai of the 5G Program Office. In May a Samsung spokesperson said the company aims to sell 10 trillion won (US$8.6 billion) worth of 5G equipment annually by 2022. Like Korea Telecom, Samsung is partnering with Verizon to develop 5G technology. Verizon is hoping to deploy 5G trials on home broadband services in the U.S. by 2017.
Japan is making large strides of its own in 5G. In May the Japanese telecom giant NTT Docomo announced it had successfully transmitted 8K video in real time wirelessly. The company said time lags in the transmission were kept to 1/10,000th of a second, which is sufficient to broadcast sporting events and news in real time. KDDI, another large Japanese telecom operator, also conducted successful 8K tests, broadcasting the high-definition video over optical fiber. The Japanese government will begin trials of 8K broadcast this year and intends to have the technology ready for the 2020 Tokyo Olympics.
Betting on IoT
Telecom executives say Taiwan’s best bet to tap the 5G market is via the Internet of Things (IoT), an evolving concept in which all types of everyday devices are connected to the Internet. According to consultancy McKinsey & Co., IoT relies on sensors and actuators embedded in physical objects, which are linked through networks. Those networks typically use the same Internet Protocol (IP) that connects the Internet.
“5G will transform wireless connectivity,” says Chen Shyang-Yih, president of Chunghwa Telecom Laboratories. “It will allow us to move from a focus on smartphones to a comprehensive ecosystem in which all kinds of different devices are connected to the Internet.” With Taiwan’s strengths in ICT, many Taiwanese firms are eager to invest in IoT, he notes. “It’s a big opportunity.”
Investors would seem to agree. In June, Fu Hwa Securities Investment Trust Co. launched an IoT investment fund that aims to raise NT$20 billion (US$625 million). The fund is targeting smart manufacturing, online banking, autonomous vehicles, cloud computing, Big Data, and smart logistics.
Also in June, smartphone chip designer MediaTek said it would invest more than NT$200 billion (US$6.15 billion) over the next five years on new technologies, among them 5G technology. At a press conference, MediaTek chairman Tsai Ming-kai said the company has already invested in IoT technologies such as autonomous vehicles, and plans to invest in deep learning and virtual reality in the future.
Some Taiwanese firms have already begun providing IoT enterprise services. Last year, Far EasTone, Taiwan’s No. 3 telecom carrier, launched a smart-city system in Tainan offering transportation, education and disaster-prevention services. The system was featured at the Global World Mobile Congress held in Shanghai in June. The company expects its Tainan smart-transportation system to attract 500,000 users by its third year of operation.
Far EasTone is targeting the consumer IoT field as well. In July, it launched a remote home-surveillance service that allows subscribers to monitor their homes when they are out of the house. The service functions by way of an internet-enabled security camera, which displays surveillance footage on the smartphone of a subscriber. Far EastTone says the service alerts subscribers when it detects an incident, such as the presence of an intruder. The company expects its home-surveillance service to attract 300,000 subscribers within three years and help it to take a 37% share of Taiwan’s smart-home market.
Meanwhile, Far EastTone is teaming up with Swedish telecom equipment vendor Ericsson to establish Taiwan’s first 5G laboratory at T-park in New Taipei City. The Lab will focus on developing innovative 5G technology and applications, such as enhanced network performance, IoT core platforms, cloud-based technologies and advanced radio technology, according to Far EasTone.
“Through our joint efforts with Ericsson, we are taking an important step toward bringing 5G capabilities to Taiwan, enabling the deployment of next-generation ICT applications and pioneering 5G services for consumers and enterprises, especially in the areas of transportation, media and utilities,” Far EasTone president Yvonne Li said in a statement.
Far EasTone aims to create an open 5G ecosystem with trials beginning as early as 2018, a company spokesperson said by email. Once it launches 5G services, FET expects its revenue mix to change significantly.
For some of Taiwan’s struggling tech firms, 5G and IoT may offer a path to revival, market insiders say. Foremost among those companies is handset maker HTC, whose fortunes have flagged amidst smartphone commoditization. In July, HTC announced it had joined the U.S. government’s Advanced Wireless Research Initiative. HTC will provide virtual-reality systems to support the program’s testing platforms, the Taoyuan-based company said in a statement. Other companies involved in the program include AT&T, Verizon, T-Mobile, Samsung, Nokia, and Qualcomm.
The U.S. National Science Foundation will lead the US$400 million program, which “aims to enable the deployment and use of four city-scale testing platforms in the next 10 years,” according to a White House statement. Participating in the program is a good opportunity for HTC, observes the 5G Program Office’s Lai. “It’s quite possible VR will be the killer application for 5G,” he says.
What Exactly is 5G?
5G is one of the telecom sector’s more nebulous buzzwords. In the sense that it will supplant 4G, 5G is a next-generation radio-access technology with data-rate and latency targets. But there is also a belief that 5G will revolutionize device connectivity in a way its predecessors did not, laying a foundation for a hyper-connected world. This view holds that networked cells and devices will facilitate Machine-to-Machine (M2M) services and the Internet of Things (IoT).
How then should 5G be defined? Researchers at the London-based GSM Association, which represents mobile operators globally, say both of the above perspectives are valid, but that unique sets of requirements are associated with particular new services. Lumping them together as a single set could pose challenges for implementation, they say.
Certainly, “the jump from 4G to 5G is greater than from 3G to 4G,” says Mark Hung, a vice president at research firm Gartner. “Previously, it was just about speed.”
Given the complex transition from 4G to 5G, experts say a strong industry commitment will be necessary to ensure that the technology is standardized and deployed by the target date of 2020. At the same time, the race is on among nations to be the first to implement the technology. “2020 is the official date, but we’re seeing intense competition among different countries trying to roll it out before that,” Hung says. “It’s really about bragging rights – being the first country in the world to deploy 5G.”
Industry observers do not expect Taiwan will be the first to launch 5G, or to lead the development of the 5G standard. South Korea and Japan are far ahead of Taiwan in that regard.
For consumers, who defines 5G and when it is deployed are less important than how the technology could transform connectivity. According to the Taiwan Association of Information and Communication Standards (TAICS), 5G will facilitate a cluster of cloud-connected devices across a range of fields including health, entertainment, and motoring. As a result, apps no longer will be confined to the device on which they run, but will allow devices in the same cluster to communicate with one another.
In its 2015 Taiwan 5G White Paper, TAICS explains how this connectivity might play out in a real-life scenario: a person driving on the road suddenly being struck by a seizure. Fortunately, she has a safety feature app on her smartphone that connects to a wearable device monitoring her health and to actuators on the car linked to a safe-braking system. These devices are all also connected through the cloud to her emergency contacts. If the driver were to suddenly have a seizure, the safety app on her smartphone would automatically engage the safe-braking system, which would pull the car over safely to the side of the road. Meanwhile, the wearable device would relay information about her health as well as her location to her emergency contacts. Her car would also be able to communicate with other vehicles on the road to avoid a collision while it was pulling over.
Meanwhile, with 5G still several years away from adoption, researchers at the GSM Association, which represents the interests of mobile operators worldwide, urges businesses and consumers to take advantage of improving 4G LTE technology. In a December 2014 report, they note that operators have made solid progress boosting the data speeds of their existing networks.” Thus, “while there remain monetization and interconnect issues around LTE, these advancements will enable operators to offer many of the services that have been put forward in the context of 5G long before 5G becomes a commercial reality,” they conclude.
(Taiwan Business TOPICS is published monthly by the American Chamber of Commerce in Taipei.)
First Editor: Edward White
Second Editor: J. Michael Cole