Ericsson to make further reductions in China after Q3 results

The Swedish telecommunications company plans to reduce its operations in China after suffering a fall in sales post Huawei ban, as well as ongoing supply chain disruptions.

Despite reporting better than expected Q3 earnings, with a profit of $665.2m (£482m), Ericsson will be reviewing staffing and offices in mainland China. 

Sweden banned China’s Huawei from selling 5G equipment in the country last year and Ericsson has since lost most of its share in telecom tender rounds in China. China sales declined by 3.6 billion Swedish crowns (£303.3m) in the third quarter alone.

Despite struggles, Ericsson earnings were boosted by strong sales of 5G equipment in most of the world, offsetting a loss of market share from China.

In his statement, Ericsson CEO, Börje Ekholm, said: “5G for Enterprise provides an exciting opportunity for Ericsson. The acquired Cradlepoint business is developing favourably, contributing to gross margin improvement for the Group in the quarter. Building on the strong foundations of our core business we will continue to invest in the Enterprise business, aiming at Enterprise becoming a sizable part of Ericsson’s business in a few years.”

Another key takeaway from their report was that, excluding the sales reduction in Mainland China, they had still had a 6% organic growth. 

A spokesperson for Ericsson told City PM, “we continue to win footprint across our business by leveraging our competitive 5G portfolio.” As part of this, they are focusing on increasing the energy-efficiency of their products. 

The spokesperson continued: “We recently introduced a new Massive MIMO radio, the lightest and smallest Massive MIMO radio in the industry. It is 10 per cent more energy-efficient than the earlier generation, lowering the total added power consumption when introducing 5G.” 

Ericsson’s shares fell slightly after the announcement; they soon recovered once the Chinese backdrop was released.