Ericsson is now completely focused on getting back market share in China which the Swedish firm lost since Chinese suppliers were blocked by Sweden from the 5G roll-out in the country, the company’s top executive has said.
The exclusion of Chinese companies angered Beijing and has impacted the business in China of the telecom equipment maker.
Last year, about 10 per cent of Ericsson’s revenue was accounted by China. However, revenues from China dropped significantly following the banning of Huawei, the Chinese telecom equipment maker, form supplying equipment for roll out of Sweden’s 5G network. The banning of the Chinese firm was based on perceived national security risks form the threat of spying by Chinese agencies through the equipment supplied by Huawei. The charges have been repeatedly denied by Huawei.
Only about 2 per cent of China Mobile’s 5G contract was awarded to Ericsson this year compared to 11 per cent last year while the firm got only 3 per cent share in a joint 5G radio contract from China Telecom and China Unicom.
“We have been in China for 120 years and I don’t intend to give up easily,” Ericsson’s Chief Executive Borje Ekholm said in an interview with Reuters. “We are going to show that we can add value to China.”
Despite Ericsson lobbying with the Swedish government to not ban China as it could have potentially retaliatory measures from China, the ban went through and was later upheld in court.
“I don’t believe we have had any help from the Swedish government to be honest,” Ekholm said.
According to warnings by analysts, Swedish tech hub Kista north of Stockholm Ericsson could stand to lose out a majority of its business in China which could be gobbled up by its Nordic rival Nokia.
Finland’s Nokia did not manage to get any radio contracts in China last year, the firm did secure one in the second round of awards. Despite this an edge over Nokia has been retained so far in this sector by Ericsson.
“If we had lost out completely then it would have put us at a competitive disadvantage from a technology point of view,” Ekholm said.
Globally, the pace of deployment of 5G networks has been among the fastest in China and currently more than half of the 5G equipment used globally is being used in the country’s roll out of the more the next generation 5G network. That makes China a critical market for any telecom equipment maker.
In addition to the potentially vast sale revenues, China also offer the opportunity for companies to 0test out their equipment for the advanced 5G technologies, an experience which could be put to use by Ericsson and Nokia when deploying the networks in other parts of the world.
Ericsson had taken bold steps to win contracts in China which included taking a hit of 1.3 billion crowns ($152 million) because of writedowns of product inventory, even though it being a dominant supplier of telecom equipment in China for previous generations of telecom technology.
Typically, companies recoup writedowns when they sell additional equipment while strategizing to make up for the losses in the long run. However, when such companies also lose out on future contracts the losses are made more significant.
“The interesting thing with bandwidth is that it is addictive. Once you have it, you want more. The large data consumption in China will be a driver of future technology needs,” Ekholm said.
“Now we need to make sure that we regain the volume elsewhere, as well as in China.”
(Adapted from Reuters.com)