Click here to listen to replay.
Whoever Builds The 5G Platform First Sets The Standards And Thus The Rules Of The Game
Published in 2015, the same year the PRC State Council laid out the “Made in China 2025” Plan (MIC2025) under which China would become a global powerhouse in ten high-tech fields from artificial intelligence (AI) to aviation, the novel “Ghost Fleet” depicts a possible global conflict scenario in which the United States (and by extension its allies) are defeated in large part due to the use of PRC-made components in its weapons systems that render them subject to enemy control and thus useless in wartime. While the novel depicted an update to the time-honored theme of the Trojan Horse in making the reader wary of accepting gifts from strangers, it did not anticipate the challenge now presented by the technology shift from 4G to 5G communications networks. In April 2019, the Defense Innovation Board, an advisory board of tech sector leaders to the U.S. Department of Defense, issued a report warning that the PRC is on track to pull off a “first-mover advantage” in the competition to dominate 5G mobile telecommunications. Note that 5G promises to revolutionize existing industries and invent entire new industries with data speeds of approximately 20x those of 4G. In the state-controlled economy that is the PRC, the primary competitor here is Huawei, the company that has become a focal point in the current U.S.-China trade war as the current U.S. administration is lobbying allies aggressively to keep Huawei equipment from being installed in their countries’ telecommunications infrastructure. However, “In public and private statements, American intelligence officials and telecommunications executives and experts have begun to concede that the United States will be operating in a world where Huawei and other Chinese telecom companies most likely control 40 to 60 percent of the networks over which businesses, diplomats, spies and citizens do business.” With the prospect of a PRC 5G “first-mover” advantage, the U.S. will be operating in a world where it is not setting the standards, a world where networks are possibly subject to PRC state control and thus compromised, or “dirty networks.”
China Needs To Push Hard To Establish Regional Hegemony As Demographics Work Against It
A War By Any Other Name Is Still Conflict All The Same As PRC Conducts An Unchecked Cyber War
Apologies to Shakespeare, but one may say that all is fair in love and war and so it is in the ongoing and unceasing cyberwar that the PRC is waging against the US and its allies. Granted the PRC is far from alone in this new front of global conflict, but it is among the most persistent and the most pernicious of state actors seeking to penetrate critical infrastructure and to steal intellectual property so as to further its ambitions under MIC2025. While cyberwar is a silent war, it is war nonetheless and there should be no illusions otherwise.
Investor Implications – ERIC & NOK Possible 5G Beneficiaries, The Evergreen Investment Case For Cybersecurity Companies
Against the above backdrop, investors should consider what alternatives exist to Huawei as a 5G supplier. First and foremost, this would include Ericsson (ERIC) and Nokia (NOK). Relative to the current cyberwar raging across the globe, investors should consider a basket of related names as a core holding. In this regard, two ETFs are specifically dedicated to cybersecurity: First Trust NASDAQ Cybersecurity ETF (NASDAQ: CIBR) and the ETFMG Prime Cyber Security ETF (NYSEARCA: HACK). Happy hunting in a target-rich environment.