Latest US Blockade: Inspur, world #3 server maker

Intel has stopped shipping to one of its largest customers in the world, China's #1 server manufacturer, Inspur. (The dark blue in the chart.) The US doesn't like the ties between Inspur & the Chinese military and put them on a blacklist. Intel told Tom's Hardware it expects to be able to resume some shipments within weeks, but the details are unclear.

Over the next 5 years, Inspur will almost certainly switch to using processors that are not subject to the US blockade. Huawei's Kunpeng matches Intel performance in the data center and other Chinese vendors are moving forward on RISC-V. As I've reported, rational companies worldwide are now designing US parts out of cars and almost everything else.

The war on China will cost a significant part of future US exports.

 

5G #fail. 85% no 5G in "90% covered" Korea

The Open Signal data is devastating for 5G. The companies claim over 90% coverage. More than 10,000 participated in Open Signal's 5G tests in May. They only connected to 5G ~15% of the time. The only explanation I can think of is that the indoor performance of Korea's 5G mid-band is awful and much worse than I and many others expected. (Left and below)

I've been asking anyone with data for indoor figures but only getting anecdotes. What I was told was that the mid-band 5G had decent indoor coverage. I should have been much more skeptical in the absence of data. Better phone antennas, improved software for MIMO, and other technologies are coming. 

But if this data proves out, 5G offers much less than almost everyone except Dean Bubley expected.

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"Churn Approaches Zero with Fiber" Carl Russo

"Fixed wireless will sometimes be the right choice and Calix's software supports it. But our telco customers with fiber will lose very few customers. If they provide strong, customer-focused service, no one will have a reason to switch. It's only a slight exaggeration to say customers only churn if they move or die." Russo adds, "This is provided the service provider chooses to “own” the subscriber experience.  A service provider that invests in fiber … but doesn’t further invest in an excellent subscriber experience … is still vulnerable."

Fiber today is routinely a gigabit; ten gigabits add little to the cost, although the demand is unproven so far.

It's been clear for several years that fiber is the right choice in most parts of the developed world where competition matters. Darren Entwhistle at Telus, Canada's #2, has been building fiber home for years because the numbers are very favorable. The reduction in churn and the savings in operating costs pay off the higher cost of fiber in most locations.

France Telecom, Telefonica Spain, and Bell Canada have proven the same.

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Lenovo's 5G PC Works on Verizon for Extra $30/month

The new executive status symbol is a PC with a 5G modem built-in. You won't have to connect to Wi-Fi. Verizon is one of the first to market, which adds $30 to your monthly wireless build. It will happily sell you the Lenovo in the picture for $1400. If you don't use Verizon wireless, the charge is $90.

Bevin Fletcher reports Lenovo had challenges adding 5G millimeter wave to the laptop and uses 9 antennas. Verizon refuses to provide any information on millimeter coverage; it's almost certainly less than 15% of the U.S. but centers on business districts.

Telcos originally expected many people would pay extra to connect tablets and PCs. So far, the signups have been very disappointing. Wi-Fi keeps getting better and is enough for most people.

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BT's KPMG Auditor: We don't trust the numbers

"BT Group plc did not maintain effective internal control over financial reporting as of 31 March 2020 because of the effect of material weaknesses." That's an amazing statement from KPMG, which very rarely reports the common client deficiencies. 

BT fired the CEO and the stock is down 75%. With hindsight, I see it was a terrible mistake not to emulate FT and Telefonica Spain moving quickly to fiber. (Both countries are more than half covered.) CityFibre has raised billions and is taking customers. Others, including Liberty Global cable, are also investing. BT is going very slowly on 5G as well. Earnings are under pressure and need a close watch.

Ericsson is also abusing the accounting rules. It is taking a write-off on its low bids for China 5G contracts although CEO Börje Ekholm said the contract would be profitable. Low bids to win the initial contract and lock in a customer are a common practice. Write-offs are intended for uncommon events. 

Ekholm's move suggests Ericsson is struggling to meet profit targets.  

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No 5G Phone? China May Count You as 5G Anyway

For several months, I've been reporting that the 5G "subscriptions" at Chinese telcos added up to much more than the total of 5G phones. China Unicom has now confirmed that they are counting as "5G" many people who are using 4G gear. 

The discrepancy should narrow because half a dozen decent 5G phones cost between US$197 & $280. The monthly cost for a 30-gigabyte service at China Unicom just fell 30% to 88 yuan, about US$13.

China Mobile claimed 55,000,000 "5G packages" at the end of May. China Telecom has more than 20,000,000 and China Unicom won't say. The number of actual 5G users end of May was probably ~50,000,000 among the three carriers. MIIT released a figure of 36,000,000 for the end of April and 15,000,000 5G phones shipped in May. Even the reduced Chinese figures are twice the total in the rest of the world.

China's 5G lead remains enormous. China Mobile at the end of May had 140,000 5G bases. China Unicom and Telecom are sharing 130,000. They are building over 10,000 per week. That is far more than twice the total 5G sites in the West. 

MIIT has restored the original goal of 600,000 in 2020 and expects 180,000,000 phones to ship. China Mobile and the China Telecom/China Unicom team will each do 300,000, with China Broadcast likely to add more by the end of 2020.. 

 

UNISOC/Ziguang Zhanrui & Hisense: YA 5G competitor

UNISOC is now shipping the T7510 5G, putting more downward pricing on chips. The Hisense F50 is in limited production with that chip, sold out on jd.com but presumably more available soon.  (Announcement below.) 5G phone prices are dipping below US$200, although Hisense is currently pricing at $500. See 5G phones fall to US$192, raising 2020 estimate to 210 million

Both companies are state-backed and hence have the resources to continue in the current tough market. UNISOC (formerly known as Spectrum) is part of Tsinghua Unigroup, which has received billions of state funding. It once had a production deal with Intel but is now on its own.

Hisense is a US$35 billion company and one of the world's largest makers of TVs (pictured,) refrigerators, and air conditioners. It goes back to 1969 and was one of the first to import foreign technology in the 1980s. It's been a modest producer of phones and hopes to continue into the 5G era.

15 million 5G phones shipped in China in May, 46% of the rebounding market.  

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5G phones fall to US$192, raising 2020 estimate to 210 million

The Huawei Honor X10 5G, pictured, sold out almost immediately at the US$147 price, But the Xiaomi K30 5G was still on sale at US$192 as I write, down from US$228. Oppo, Vivo, Realme, and ZTE all have models under US$280. These are fine phones, about 6.5" and with 3 or 4 cameras. (618 is a special sales holiday at jd.com and Alibaba. Prices tumble and sales are many billions. Amazon's "Prime Day" is a copy.)

13 phone makers are fighting for a market that can only really support 4 or 5. Xiaomi set off the price with a US$285 announcement in December, one reason I put out the 210 million forecast, twice as high as most others. Even the most aggressive didn't expect prices of $200-250 before late in the year. 

Component prices have been tumbling. MediaTek and Qualcomm have been slashing prices on their new mid-range 5G chips, while UNISOC/  is now also shipping chips. BOE in particular has a massive capacity for screens. Qualcomm has new RF front end components, forcing the traditional RF vendors to fight for market share. Sony has a billion-dollar camera plant that must keep busy. 

5G, disappointing in the West, is exploding in China. 15 million phones in May, 10,000 bases upgraded per week, price dropped from ~$18 to ~$13/month. China almost certainly will hit its 2020 goal of 150 million. The 5G iPhone with 5 nm processor going into production in July, should be a big seller in U.S. late in the year.