Ericsson looks to the long term in China; Huawei goes on UK charm offensive

News

Chinese firm launches UK public campaign against exclusion from networks; Ericsson outline short-term impacts to its Network disivison from Chinese deals.

The Swedish telecom equipment maker said its strengthened market position in China “is strategically important for Ericsson as this will generate scale advantages and strengthen Ericsson’s position in the world’s largest 5G market, which is expected to be an important driver of critical future requirements and new feature developments”.

The company said expects its contracts with the Chinese operators to be profitable over their lifetime, but that margins in Q2 of 2020 are expected to be negative due to high initial costs for new products.

Ericsson’s Networks business in the second quarter will be hit by the write down of assets related to pre-commercial product inventory for the Chinese market to the tune of SK1 billion (€96.252 million).

Long term vision

In a statement Ericsson said, “While the deployment of 5G in China will continue to be dilutive to Segment Networks gross margin short-term, it is expected to contribute positively to gross and operating income from the second half of 2020 and in line with the business plan be profitable over time.

“With current visibility we maintain the financial targets for 2020 and 2022.”

Huawei advises caution

In the UK Huawei has launched a public campaign against being excluded from 5G infrastructure, the latest stance taken by the Tory government after pressure from Tory party members, British security agencies and the Trump Administration.

Huawei’s VP, Victor Zhang, told the Financial Times [subscription needed] over the weekend that the company was not controlled by the Chinese state and had invested heavily in the UK for 20 years.

He also asked the government not to overestimate the security risks nor underestimate the economic fallout of removing and excluding Huawei’s equipment from 5G and fibre broadband networks as it strives to recover from the effects of COVID-19 and Brexit.

Overshadowed

The PR campaign was somewhat overshadowed by The Wall Street Journal [subscription needed] publishing a translated, internal memo from 2018 from the company’s founder and CEO, Ren Zhengfei. He urged staff to copy Google’s global ambitions in colourful terms: “Surge forward, killing as you go, to blaze us a trail of blood.”

Ren's liking of war metaphors for business has been widely reported previously.