Huawei hasn’t won the 5G Race: A Case Study of 5G Competition in Malaysia
By Axel de Vernou | Huawei's failures are not always defined by geopolitics. In 2022, Malaysia contracted Ericsson for its national 5G rollout, despite Huawei's continued relationships within the country. What technical advantages do Western firms find over the cheaper, more efficient Huawei? What will Malaysia's new 5G program look like?
April 18, 2023
On September 28th, 2022, Malaysia and China signed a memorandum of understanding (MOU) on digital communications cooperation with regard to 5G, paving the road for future joint initiatives between the two states on sharing best practices, experience and expertise. While Malaysian Communications and Multimedia Minister Saifuddin Abdulla noted that Huawei would “manage the transition to [a] 5G network,” Ericsson beat Huawei in winning a contract worth RM11bn ($2.5bn) to build Malaysia’s national 5G network. The deal would allow Ericsson to further its goal of increasing the “supply of 5G radio, core and transport products and solutions, as well as related implementation and integration services.”
Additionally, Ericsson has worked heavily to promote 5G adoption throughout the country. In 2022, the company signed its own MOU with Malaysian Research Accelerator for Technology and Innovation (MRANTI) and Digital Nasional Berhad (DNB) with the aim of sending resources directly to Malaysian businesses and private companies. The three entities launched the 5G Experience Center at a facility owned by MRANTI known as the MRANTI Park. The Experience Center welcomes visitors from private companies and provides them with the necessary training, skills, and hardware to implement 5G in their own businesses. In this sense, Ericsson has presented itself as a provider or a hub from which companies can acquire the resources to make the transition to 5G. The principal objective is to “equip innovators, researchers, and businesses with cutting-edge infrastructure and capabilities to drive returns on innovation across the ecosystem,” according to Dzuleira Abu Bakar, Chief Executive Officer of MRANTI.
Huawei has tried forcing itself into the market as Malaysian officials claim that 50% of the country has received 5G coverage. It has tried to make Malaysia re-open the tender process for selecting which companies can invest in 5G infrastructure through “a mixture of soft power and outright lobbying to try to get the adoption of their systems somewhere in the rollout.” U.S., UK, and EU government envoys are insisting to Malaysian officials that they should not open the negotiating process once again. This would provide Huawei with the opportunity of setting up a rival network in Malaysia. In 2021, it seemed likely that Huawei would acquire the 10-year deal, but Ericsson provided a more competitive offer.
Indeed, one of Malaysia’s 5G providers, Digital Nasional Berhad, has shown interest in “[a]ppointing a second 5G vendor besides Ericsson,” since this would potentially “reduce costs and speed up the 5G rollout nationwide.” In addition, “having a dual vendor approach could potentially mitigate the risks of a single point of failure.” It allows an entire part of 5G coverage to remain untouched if one of the providers is facing a network problem.
Theoretically Transformative, Currently Limited
In Malaysia, 5G will fulfill its traditional role of connecting more users to the Internet, but that only scratches the surface of what China can achieve by continuing to deploy its technologies. “The convergence of 5G and different industrial sectors such as agriculture, education, health care, manufacturing, smart transport and tourism presents new opportunities for industries, society and individuals to advance their digital ambitions and deliver new and better services,” Malaysian Prime Minister Mahathir Mohamad said. MRANTI’s Abu Bakar also highlighted the scope of the new technology, saying that the Experience Center will entail “facilities and resources to support industry growth in dronetech, healthtech, agritech, bioscience and 4IR enabling technologies.” What does this mean in practice?
In the summer of 2022, Malaysia began planning out “[a] modern agriculture strategy focusing on 5G technology… to tackle food security issues.” The initiative will promote agrifood investments and efficient management of farms and plantations through the Internet of Things. Concretely, this looks like using “technologies like IoT, sensors, location systems, robots and artificial intelligence on farms” to “monitor the health and measurement of palm trees” instead of having manual laborers accomplish the same task. “According to the Malaysian Communications and Multimedia Commission (MCMC), a total of 500 5G locations have been completed under phase 1A as of December 2021, covering areas in Cyberjaya, Putrajaya and Kuala Lumpur, while phase 1B would see another rollout of 3,518 5G sites by year-end.” Considering Malaysia’s current policy prioritizing widespread agriculture reform, adoption of 5G can provide a necessary boost to what has been a lackluster transformation so far.
On the manufacturing front, Malaysia remains a valuable case study. As proposed by ZTE Corporation’s recent conference in Malaysia, “[t]he manufacturing sector, which accounts for about 21% of Malaysia’s gross domestic product (GDP), is just one of the many key industries poised to benefit from digital transformation in turning production lines into ‘smart factories’, which can be done by creating 5G Standalone (SA) private networks.” To that end, Chinese deployment of 5G technology has already begun “accelerating network convergence and [is] becoming increasingly crucial in building a unified and intelligent transport network,” which will be “paramount for future network and services monetisation.” Specifically, Bai Yang, Vice President of ZTE Corporation, noted that “more efficient and intelligent production and manufacturing could be realized with lower power consumption through 5G Industrial Internet, Multi-access Edge Computing and Artificial Intelligence” in Malaysia. Huawei has thought about the tools it will use if it gets access to Malaysian 5G markets—the question is whether it will secure the financial means to accomplish this.
Healthcare is also an essential element of Malaysia’s 5G transition. TM One, which falls under Telekom Malaysia, is enhancing patient care, improving operations, expanding remote medical learning, and sharpening technologies that monitor patients remotely through 5G projects. More specifically, TM One is using “mixed-reality experiences with 3D data processing, analytics, visualization, and simulation applications,” made possible through Microsoft’s technology, to augment the “productivity of healthcare personnel.” The goal is to accelerate their ability to see, diagnose, and operate on patients.
Notably, GSMA reports that while 5G coverage has reached almost 47% of Malaysia’s population, less than 1% of consumers have actually adopted 5G. Without adequate incentives for local innovation using 5G and measures to increase affordability, Malaysia will continue to struggle to meaningfully implement 5G into its economy.
Ericsson hopes to present itself as a superior alternative to Huawei by deploying Multi-Operator Core Networks. These networks come about through the company’s Radio Resource Partitioning feature, which, in Ericsson’s words, “optimizes radio resources, strengthening end-to-end slicing capabilities for dynamic resource management and orchestration. This ensures fast and efficient delivery of services as well as high-quality user experience.” Ericsson’s radios are more competitive against Huawei because they are less bulky and built on secure chips from the start of the supply chain that “prevent tampering and access” to the radio’s “crypto keys.” Using what Ericsson calls the “system-on-a-chip technology,” the company reduced the size of its radio transmitters by 45% in 2021, which made them lighter than the 5G radios offered by Huawei. This process also increased their energy efficiency by 15-20%.
Multi-Operator Core Networks allows for the network to be shared by six operators, each with their own ability to create differentiation that speeds up services. The key utility of the networks is that Operations Engines built by Ericsson can use “AI, automation and Cognitive Software to predict and prevent issues” by connecting with the local networks, helping local populations before technical problems arise. Ericsson has also assured that the 5G network will operate through a combination of local resources and the most recent developments in Artificial Intelligence.
During the 2023 Mobile World Congress held in Barcelona, the Minister of Utility and Telecommunication of Sarawak was briefed on how 5G can play a role in the state’s development and in the digitization of its economy. Ericsson’s 5G Standalone network, powered by Carrier Aggregation and Network Slicing technologies that resemble its Radio Resource Partitioning feature, was showcased as a way to “enable connectivity for schools, hospitals and businesses located in historically underserved areas, where it can transform education, healthcare and local economies.”
AR and VR headsets that plunged participants into a metaverse similar to the technology being deployed in the country’s healthcare system were also displayed. This demonstrates that Ericsson is taking tangible steps to advance the health- and agriculture- related goals outlined above during Malaysia’s 5G transition. Huawei has also demonstrated that it is advancing in this technology, but has not yet had the same opportunities as Ericsson to showcase its technology to Malaysian officials.
Where Chinese companies seem to have the advantage is with respect to educational initiatives. ZTE claims that it has “obtained strong support from the Ministry of Higher Education of Malaysia” by “organizing guidance and internship opportunities for students studying at Malaysia’s Multimedia University. “They can take the theories into practice, have access to the most advanced 5G network technologies and equipment, and witness the application cases of 5G technologies in the industry,” the company touts. While this is not equivalent to constructing 5G infrastructure, it shows that Chinese companies are interested in the educational dimension of the 5G rivalry.
In short, Ericsson has made the greatest strides to deliver 5G to Malaysia because of its network slicing, resource management capabilities, and virtual reality components. The company has had the opportunity to showcase these technologies to Malaysian executives who have ambitious goals for 5G deployment by the end of 2024, which may encourage them to continue with a single provider. However, the advantages of having a dual vendor approach and accusations by some Malaysian politicians that the contract with Ericsson did not follow a competitive process means that Huawei still has room to push itself into the Malaysian market.
About the Author
Axel de Vernou is a sophomore at Yale University studying Global Affairs and History. He conducts research and publishes work on grand strategy, world order, statecraft, economics, Russian history, great power competition, and diplomatic history for organizations, works as a research assistant at the Yorktown Institute, and is currently on the Yale Policy Institute team of the Geo-Tech Initiative.