Japan at a crossroads: The 4G to 5G (r)evolution

Japan at a crossroads: The 4G to 5G (r)evolution

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The country can leverage next-generation networks to boost industries, spur innovation, and regain technology leadership for a prosperous telecom sector.

Japan has been a global leader in mobile communications for the past four decades. Its landmark innovations include the first commercial mobile browser-based web service, the first mobile email, and the first handsets with cameras. A culture of innovation has created a thriving ecosystem and fueled a successful expansion of Japanese industry.

However, in recent years, Japan’s leadership has been increasingly challenged. Its networks are starting to show signs of capacity constraints, the domestic vendor landscape has been disrupted by global innovations, such as the iPhone, and industries are not being able to fully benefit from new features such as IoT. Japan now faces an inflection point that will define its future competitiveness in mobile communications.

As we speak, mobile networks are evolving towards 5G, which will bring substantial improvements in terms of speed, capacity and lower latency. This provides a significant opportunity for Japan for several reasons. First, it will help operators alleviate capacity constraints and handle the exponential growth in data traffic and connections. Second, it will generate new opportunities in high-growth areas such as AR and VR, which to date are less dominated by global competitors. Third, it will enable the industry to innovate and stay competitive in, for example, autonomous vehicles, and robotics. Fourth, it will give the government and its citizens access to new value-adding services, such as remote patient monitoring and disaster alerts. Finally, the value at stake is massive, estimated to be $4 to $11 trillion globally in 2025 from IoT alone. Altogether, leaning in on the network evolution should be a priority for Japan.

To capture this opportunity, stakeholders should consider three strategic imperatives:

  1. Operators need to build the next generation infrastructure and offerings based on the best of global products and services: By using solutions from the global innovation ecosystem and limiting customization, operators will be able to reduce time to market for new features, limit vendor lock-in, and deploy more cost effective solutions for their networks. Going for global standards and developing procurement capabilities will help this process.
  2. Subscale mobile telecom equipment vendors need to build alliances and find new pockets of growth: By refocusing their portfolios, limiting customization, and building alliances, network equipment and handset players can tap into 5G growth opportunities and combat increasing development costs.
  3. Industry, government and regulators need to collaborate with operators and mobile telecom equipment vendors, and embrace the new technology: By actively engaging with the telecom industry to shape the next generation networks, the private and public sector can enable new products and services that can be scaled globally, and regain technology leadership.

By following these imperatives, Japan can regain mobile communications leadership, boost its export industries, and spur innovation that will benefit all of society. However, time is of the essence. An early deployment will result in first-mover advantages. A failure to act now could let other countries reap the benefits, and hold Japan back.

About the author(s)

André Andonian is a senior partner in McKinsey’s Tokyo office, where Kenji Nonaka is a partner, and Axel Karlsson is a senior partner in the Hong Kong office.

The authors wish to thank Ken Kajii, Masahiro Komatsubara, Ole Jørgen Vetvik, Richard Lee, Roi Shigematsu, and Suraj Moraje for their contributions to this article.