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China leading the digital future
China, by design: World-leading connectivity nurtures new digital business models
China may have the world’s most extensive 4G cellular mobile network and fiber-to-the-premise networks in 2019. Its cellular network is likely to be the world’s largest by number of base stations (5 million for 3G/4G), cell sites (over 2 million) and subscribers (over 1.2 billion). China is also positioned to become a leading 5G market. At the start of 2019, China will have over 330 million premises connected to fiber, significantly greater than any other market.
China’s telecommunications infrastructure is the foundation of digital user bases that are unparalleled in size: it has over 800 million Internet users, the majority of which access via mobile.
This connectivity provides a platform for business model innovation. In recent years, network rollouts have catalyzed the emergence of three new mass-market industries — mobile payments, mobile commerce, and bikesharing—each of which should have hundreds of millions of users by the start of 2019. At that point, 600 million people in China will use smartphones to make mobile payments — with transaction volumes in the hundreds of trillions for 2019 —, about 550 million will shop online via smartphone, and about 200 million will use bikesharing services.
The full report predicts that China’s advanced networks should become the foundation for new high-bandwidth applications including machine vision, social credit as well as new retail concepts—each of which could boast hundreds of millions of users and generate tens of billions of dollars annually by 2024.
China inside: Chinese semiconductors will power artificial intelligence
China is moving quickly in its efforts to define the next phase of the digital economy, with government, manufacturing, and hyperscale digital businesses all working together to support semiconductor manufacturing. Deloitte Global predicts that revenues for semiconductors manufactured in China will grow by 25 percent to around US$110 billion in 2019, from approximately US$85 billion in 2018—meeting growing domestic demand for chipsets driven in part by the increasing commercialization of artificial intelligence (AI). We further predict that in 2019, a Chinese chip foundry will begin producing semiconductors specialized to support AI and machine learning (ML) tasks.
If China meets its goal of growing its domestic chip production as a percentage of its total chip consumption to 40 percent by 2020, it could have a significant impact on the global chip market. Chinese use in 2018 accounted for more than half of the world’s semiconductor demand. If Chinese chip manufacturers and the Chinese state can buy, hire, and develop enough advanced manufacturing capabilities while meeting the demands of AI, not only could these activities spark more domestic innovation, but China just might be positioned to have an even greater impact on the next generation of cognitive technologies.
The report explores five conditions that make China better positioned than ever before to become a globally competitive player in both semiconductors and AI—along with the global implications of such a market ascent.