What Is iQiyi after with China Unicom Deal?

Companies to jointly create 5G products

iQiyi (IQ) will collaborate with China Unicom (CHU) to develop virtual reality (or VR) products, the companies announced recently. This collaboration is part of iQiyi’s efforts to commercialize 5G technology, which promises faster wireless connections than current 4G networks.

iQiyi is primarily a digital video provider in the mold of Netflix, but the company is also into the hardware business. The company sells VR headsets under the QIYU VR brand. iQiyi is betting on 5G to enable it to deliver better VR entertainment experience for its customers.

What Is iQiyi after with China Unicom Deal?

Eyes on the $27 billion global VR market

VR is a big business. According to Zion Market Research estimates, the global VR market was worth $2.0 billion in 2016 and will grow to $26.9 billion by 2022. iQiyi is betting that working together with China Unicom will help it speed up its penetration of the multibillion-dollar VR market.

China Unicom is one of the leading mobile operators in China. Last year, China Unicom and its domestic peers China Telecom (CHA) and China Mobile (CHL) inked a $2.3 billion 5G-related deal with Nokia (NOK), one of the top suppliers of telecom equipment. China is competing with the United States to be the first to deploy a nationwide 5G network. In the United States, mobile operators Verizon (VZ) and AT&T (T) are already underway with their 5G network rollout.

The iQiyi-China Unicom pact closely mirrors Verizon’s strategy when it began providing 5G services last year. Verizon gave entertainment priority in its 5G rollout, offering its 5G customers three months of free YouTube TV service.