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MarketScreener Homepage  >  Equities  >  Xetra  >  Volkswagen AG    VOW3   DE0007664039


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German Industrial Firms Plan to Build Private 5G Networks

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04/06/2020 | 01:04pm EDT

By Catherine Stupp

German car manufacturers, chemical companies and other industrial firms are taking steps toward creating their own private 5G networks, leapfrogging Germany's telecommunications carriers, which haven't yet deployed the superfast networks for widespread commercial use.

BMW AG, Robert Bosch GmbH, Volkswagen AG, BASF SE and Deutsche Lufthansa AG are among the companies that have applied to set up local 5G networks in recent months after Germany's network regulator began accepting applications for the radio spectrum last November. So far, 33 companies have bought licenses, a spokesman for the regulator said.

Private 5G networks are especially useful for industrial applications such as operating robots and driverless vehicles inside factories, which need fast, reliable connections that can perform critical tasks in real time, experts say.

"You wouldn't be comfortable putting your industrial applications on a Wi-Fi network because there's no reliability," said Petar Popovski, a professor of wireless connectivity at Aalborg University in Denmark. Seconds-long delays might not matter in an office, but being able to control precisely when a heavy machine processes materials, for example, can make a big difference to an industrial company.

The private networks will also help strengthen cybersecurity, the companies say, because they will be able to configure the networks to fit their needs, use custom security features such as encryption and avoid sharing bandwidth with other firms.

"We decide where the data is stored. We don't have any external influences," said Fabian Berger, a board member of Mugler AG, a company based in Oberlungwitz, eastern Germany, that provides enterprise telecoms services. Mugler is setting up a local 5G network that will span two office buildings and two fabrication-and-logistics facilities across 40,000-square meters. Mugler may save money by building its own 5G network rather than using a public network, Mr. Berger said.

In the U.S., Walmart Inc. is in talks to test a 5G network provided by Verizon Communications Inc., The Wall Street Journal reported last month. The network would support new digital health services in Walmart stores. Verizon and other U.S. carriers are setting up the networks in some cities and sports arenas.

German manufacturers and other industrial firms can deploy 5G networks without a telecom operator, and can choose the suppliers that provide equipment. Britain started a similar process last year to sell licenses for companies' 5G networks. The U.S. hasn't opened up applications for 5G spectrum licenses to industrial companies.

A spokesman for the German Federal Network Agency said the agency decided to allow private 5G networks in part because of the potential benefits for industrial companies. Companies have so far paid between around EUR1,000 and EUR1 million for the licenses, depending on the bandwidth and the size of the area that will be covered, he said.

Discussions about potential cybersecurity weakness in equipment from Huawei Technologies Co. sparked companies' interest in running their connections independently, said Jochen Reinschmidt, senior manager of political affairs at the German Electrical and Electronic Manufacturers' Association.

The U.S. government considers Huawei a national-security threat and claims the company could use its products to spy on behalf of the Chinese government. Huawei has consistently denied the claims. In January, the U.K. approved the use of Huawei equipment in so-called noncore parts of the country's 5G network, which include base stations and antennae.

Mobile carriers choose where to buy network equipment, and their corporate customers and consumers must accept those decisions or switch carriers. By building their own 5G networks, industrial companies can make their own supplier decisions.

Mr. Berger of Mugler said the company will use equipment from several suppliers, but declined to name them.

BMW bought spectrum for a private 5G network at one of its sites in Bavaria. M3connect GmbH, a German telecommunications software company, will set up the network and is testing different suppliers' equipment in a lab, a BMW spokesman said.

BMW didn't respond to a question about whether the network will use Huawei equipment and m3connect declined to comment on whether it will use Huawei products.

Local 5G networks come with other security benefits, Mr. Popovski said. Companies can keep a close eye on activity crossing private networks, he said.

"Any intruder in the area will be detected simply because you own it," he said. "It's the same as if you bought a parking place and see someone else park there."

Lufthansa's maintenance subsidiary, Lufthansa Technik AG, in February said it set up a private 5G network operated by Vodafone Group PLC, using Nokia Oyj equipment, for remote engine inspection and remote 3-D cabin design. Lufthansa Technik said the network increases security and provides more configuration options, allowing the company to adapt the bandwidth for uploads and downloads for specific projects.

Chemicals firm BASF is discussing plans to build its local 5G network, and aims to decide by the end of the year which network operators and equipment suppliers will manage it, a spokeswoman for the company said. The network will be used for BASF's production facilities and logistics, she added.

Germany's industrial giants can protect valuable information by maintaining control over operational data and deciding where it is stored, said Gabriel Brown, a principal analyst at Informa PLC's research business, Heavy Reading. Companies operating a local 5G network choose whether to store data in their own data centers or in the cloud, for example.

More reliable connections at industrial production sites are another potential benefit. A Volkswagen spokesman said the company wants to buy a license for a local 5G network, and that a dedicated network is the only way to guarantee transmissions will be interference-free.

Volkswagen wants to use 5G for bandwidth-intensive industrial tasks such as managing the 5,000 internet-connected robots in its Wolfsburg, Germany, plant. In the future, the auto maker will need 5G to coordinate robots and driverless cars in production sites and transmit volumes of data in real time, the spokesman said. The company would prefer to operate the network itself, and is in the process of hiring mobile-technology experts, the spokesman said.

Write to Catherine Stupp at Catherine.Stupp@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
BASE CO., LTD. 7.44% 14880 End-of-day quote.83.48%
BASE, INC. -3.88% 3470 End-of-day quote.97.72%
BASF SE 5.80% 54.97 Delayed Quote.-22.91%
BYD COMPANY LIMITED 0.00% 47.7 End-of-day quote.22.78%
DEUTSCHE LUFTHANSA AG 5.93% 10.025 Delayed Quote.-42.39%
NEXT 2.52% 5530 Delayed Quote.-23.03%
VOLKSWAGEN AG 2.24% 143.22 Delayed Quote.-20.51%
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Sales 2020 214 B 240 B 240 B
Net income 2020 4 909 M 5 496 M 5 496 M
Net cash 2020 17 430 M 19 515 M 19 515 M
P/E ratio 2020 15,2x
Yield 2020 1,97%
Capitalization 72 415 M 81 001 M 81 077 M
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Nbr of Employees 670 011
Free-Float 57,0%
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