Why TD-SCDMA represents a global shift in geopolitical power

Can the deployment of a technology choice in one country, have a disruptive impact on the economies and manufacturing industries of the rest of the world? When the technology choice is supported by a powerful government, the population of the country is large enough and the capability to develop the technology is strong enough – probably yes.

Despite a very well developed global standard for 3G technologies based on the GSM-track (WCDMA), the Chinese over the past few years, have designed their own, known as TD-SCDMA. To date not much interest has been shown in the technology outside China and even in China one detects a certain reluctance on the part of the carriers to deploy this home grown technology. So why did they do it?

The answer lies in the fact that, like Japan in the 70’s and 80’s, China is proving it has the capability to commoditise even the most complicated technologies. WCDMA is a technology with its origins outside China and the Chinese do not share in any of the benefits of the intellectual property. TD-SCDMA by contrast is a technology entirely developed within China and for which they own all the intellectual property. Interestingly they chose to use “Time Division Duplex” (TDD) for this system. TDD uses one frequency band and transmissions occur alternatively in the upstream and downstream directions. By contrast the mainstream WCDMA technologies use “Frequency Division Duplex” (FDD) where 2 different frequency bands are used, one carrying only downstream traffic and the other upstream. On a recent trip to China I asked a Chinese academic why they chose TDD (which is generally regarded as inferior to FDD for various technical reasons too complicated to discuss here) and his answer was that it allows them to use all parts of the frequency band which is necessary given the spectrum shortage that we face globally. This is a valid point.

Given the lack of interest outside China will TD-SCDMA succeed? This is where it gets interesting because the Chinese Government has mandated that its largest carrier, China Mobile, must use TD-SCDMA for its 3G deployment (3G deployment has only recently started in China). This ensures that there is a domestic market for TD-SCDMA in the 100’s of millions which is clearly enough to achieve the economies of scale necessary for the technology to succeed. Furthermore, despite the indifference in the developed world, there are plenty of other regions that have yet to deploy 3G. For example, a billion people in Africa are mainly served by 2G and given the Chinese influence in many parts of Africa, it is a safe bet to assume that they will push their technology there.

So where does my grandiose claim of the geopolitical nature of this technology come in. Well, it is fairly clear that the Chinese intend to progressively build out their own technology systems for all sorts of technologies that they currently import – not just in telecommunications but in other areas such as manufacturing, transport, medicine, etc. They have the skills, technology and scale to make this possible. It means that European, US and Japanese technology developers are going to be facing a major challenge from a 4th competitor of global scale. It is also going to reduce the market opportunities for the vendors from outside China by cutting off the world’s most dynamically advancing market.