Mitigating economic risk through digital transformation
In association with Huawei.
After months of lockdowns restricting work and movement, many countries have begun to lift the drastic measures they put in place to slow the spread of the coronavirus. Now, they face a different challenge: An economic downturn that shapes up to be one of the biggest shocks in generations.
Normal economic activity has been disrupted on a scale not seen in peacetime as the patterns of everyday life have been upended.
Governments are intervening in an attempt to stave off the collapse of companies and livelihoods. Many economists believe the world has already entered a recession. In the US alone, nearly 40 million people have lost their jobs in the last three months, bringing the official unemployment rate to a staggering 14.9%, the worst since records began. This unprecedented surge signals an end to a decade of expansion for one of the world’s largest economies.
But not only the pandemic is causing damage to the economy. The ongoing trade dispute between China and the US has negatively affected the global economy and put a multitude of industries at risk. The combination of these two circumstances is fertile ground for a global recession which could last for the better part of this decade and is likely going to affect the standard of living all over the world. During the initial outbreak of the coronavirus, technology has proven vital by supporting medical personnel or enabling education in a time of social distancing. Connectivity has been a key ally in combating the effects of the virus. Why shouldn’t technological innovation make a difference after the pandemic in helping efforts to recover from this economic crisis?
Digital transformation: The engine of economic recovery
Undoubtedly, digital innovation will be the engine for economic recovery. That is why the telecom industry is relatively risk-resistant to the crisis in comparison to other industries. Especially the 5G expansion could have a positive effect on the recovery of the economic crisis because it is supporting the introduction of new goods and services, with higher data rates and lower latency expected to enable greater use of IoT devices. 5G could furthermore improve business efficiency in producing and delivering goods and services and enable scope for greater innovation and the development of new products. The fifth-generation mobile network can generate higher productivity all over the world and would thereby work as an engine for economic recovery.
Meanwhile, digital transformation has become an important driving force for the three pillars of the economy – stabilising investment; broadening the industry; and promoting consumption. By the end of May 2020, 81 operators in 42 countries/regions have commercially deployed the solution. The accelerated commercialisation of 5G has significantly driven the development of the 5G industry. Currently, there are more than 200 kinds of 5G terminal equipment around the world, among which consumer smartphones account for about one third, and vehicle-mounted and industrial terminals account for the rest. 5G drives operators’ business model innovation and upstream and downstream industry development, which can generate higher productivity around the world and become an engine for economic recovery.
The need for digitalisation in Europe
The world is entering the first truly digital era and countries have to make the most of the opportunities associated with this mega trend. Europe’s digitization remains a work in progress as many industries need to catch up. In comparison to the US and China, European firms currently lag behind in adopting digital technologies, particularly in the construction sector and IoT. In general, digital firms tend to have higher productivity and better management practices than non-digital firms, are more innovative, grow faster and create higher paying jobs, which could all help in recovering quicker from a recession. Yet, Europe is hesitant over its approach on the 5G expansion, although the need for a faster digitalisation is evident. Europe was hit particularly hard by the coronavirus and is facing large scale unemployment and an economic slump not seen since World War II.
Fortunately, the progress of 5G deployment in Europe will be further accelerated in 2020. On February 19, 2020, European Commission released a series of strategic plans on shaping the digital future of Europe, including the European Data Strategy, covering the development and legislative framework in the fields of data utilisation, artificial intelligence, and platform governance. This marks a milestone in the digital integration process of the EU, and helps it grasp the new window period brought by the data economy. GSMA predicted that by 2025, the number of global 5G connections will reach 1.8 billion, among which Europe will account for 13.1% (about 230 million), and 5G will account for 34% of all connections in Europe.
Technological innovations such as Big Data, cloud computing, and artificial intelligence will stick to the 5G infrastructure network because it supports the introduction of new goods and services. It is expected that higher data rates and lower latency will enable more use of IoT devices. 5G will also further improve the production and delivery efficiency of products and services and provide more room for innovation and new product development. For example, faster download speeds and lower latency will make cloud computing more efficient and allow better collection and analysis of big data to improve real-time decision-making.
Now more than ever, Europe needs to invest in digital technology to lead the continent into a prosperous future.
Teamwork is necessary
So far, Europe has struggled to reach consensus on the way forward. A united Europe is a formidable economic power ready to face this economic challenge and Europe can and will be a global leader in the 5G rollout. Now is the time for governments to connect and collaborate in fighting the effects of this crisis through continuously investing in new technology, especially in the fifth-generation mobile network and thereby increasing productivity and supporting the recovery of the global economy.
Huawei has maintained a strong presence in Europe for over 20 years and is honored to share an important role in contributing whatever it can to help with technology. We firmly stand by our European partners and will support them by all means.
Ye Xiaowen is CFO, Western Europe, Huawei Technologies
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