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Ericsson is increasingly pessimistic about its Chinese prospects

In the process of trying to raise half a billion euros, Swedish kit vendor Ericsson warned it’s increasingly unlikely it will get much more work in China.

A couple of weeks ago we reported on a story published by state-controlled Chinese media that effectively threatened Sweden with proxy retaliatory action against Ericsson if it didn’t reverse its ban of Chinese vendors in the country’s 5G networks. While there was no direct reference to Chinese government sources, it was fair to assume that was where the story originated.

It seems Ericsson agrees, because today it updated the ‘risk factors’ in the corporate bond prospectus. While Ericsson’s 2020 annual report noted potential risk factors to its business in China thanks to the decision made by the Swedish communications regulator, the company felt compelled to update that information in the prospectus with the paragraph below.

While Ericsson is invited to various ongoing tender processes in China, the final outcome remains uncertain and it is the company’s current assessment that the risk has increased that Ericsson will in those tenders be allocated a significantly lower market share than its current market share.

That’s hard to argue with and, if anything, exhibits classic Swedish understatement. Of course we have no idea what Chinese leader Xi Jinping is thinking, but the international stance of the country seems to have become increasingly belligerent in recent years. It’s likely that Xi considers a failure to retaliate when it’s in his power to do so will be a sign of weakness, something he seems keen to avoid.

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7 comments

  1. Avatar Professor Peter Curwen 24/05/2021 @ 5:39 pm

    Ok, that is the quid pro quo. Huawei out of Europe, the USA and most of Asia, Ericsson out of China where it only picks up the leftovers from Huawei, ZTE etc. Is that a poor trade-off? Doubt it.

    • Avatar Guillaume 24/05/2021 @ 9:52 pm

      12% of China market is a ‘leftover’ that can be compared to Europe when it comes to the number of sites deployed…

      Yes it’s a leftover, but it’s some heavy leftover, so yes it’s a poor trade off, a very poor one, and we (Ericsson) would very much have loved to avoid that poor trade off as we were basically the only non Chinese company that managed to get some ‘leftovers’ out of the Chinese 5G market.

  2. Avatar KC Erasmus 25/05/2021 @ 7:21 am

    I once listened an Italian businessman when everyone was chasing after America’s business as if it was the only country on the planet ( China is now being treated by most companies in the same way ).
    This Italian businessman, when asked why his company was focusing on business in smaller countries across the globe, he answered ; “When we add up the business from all of the smaller countries, we have business equivalent to another ‘America’ “. This points to the fact that everyone should Stop focusing solely on China, and start seeing the planet in 3D.

  3. Avatar Clifford H Setyono 25/05/2021 @ 12:47 pm

    China is not America. It has four times the population. The bottom line is the Swedish government made a stupid decision despite a warning from Ericsson itself.

  4. Avatar AL Cheung 25/05/2021 @ 3:02 pm

    The West is so hypocritical it is disgusting! When they cannot compete, they manufacture excuses to ban Chinese products! What a shameless bunch! When Chinese retaliate, it is accused of being belligerent! What a bunch of whining idiots!

    • Avatar happiman 27/05/2021 @ 5:51 am

      So funny to hear “When they cannot compete, they manufacture excuses to ban Chinese products”.

      Shame on you Chinese descendant, You are the internationally famous cheaters. Cheating, lying and stealing is the foundation of modern Chinese culture.

      https://www.lamag.com/citythinkblog/ucla-cheating/
      “A Chinese Cheating Ring at UCLA Reveals an Industry Devoted to Helping International Students Scam Grades”

  5. Avatar Cletus the Clown 27/05/2021 @ 10:25 am

    ok, just for a second weigh up what was going through the minds of the Swedish government when they decided to ban Huawei. Do you not think they knew full well what the repercussions of that might be – Gui Conyou is one of the less silent of the Chinese ambassadors. For an ambassador to say something to the people of Sweden like “We treat our friends with fine wine, but for our enemies we got shotguns” with the clear implication that for the Swedish, it’s shotguns, but by the way, buy Huawei, there is no possibility of any harm, does kindof ring hollow. Thats just on the diplomatic front.
    Much more seriously is the technological side. Europe en masse has turned away from Huawei. The NCSC’s report on Huawei was damning. Germany’s BND was equally as scathing, although Merkel and von der Leyen tried to look the other way.
    No one thought the Clean Network initiative was going to go far – it was pushed by Pompeo under a Trump government, but the guy who took it forward to other countries, Keith Krach, obviously pushed the right buttons, as 60 countries and over 200 operators have signed on. If there was no risk, no one would have signed on. Operators do not want the hassle, cost or disruption.
    Sweden made a strong decision, but it was done clearly, with a good knowledge of the risks and they wont be backing down. Despite Ekholm’s protestation. He needs to realise that China is a lost cause, cut his losses, and leave. Under Xi, it will never improve, he is just setting Ericsson up to be used as a weapon against the Swedish government. It was clever of the CCP to get foriegn companies to do their work for them, however this is getting less and less effective – plus Ericsson is on a storm overseas. They are picking up more work than they know what to do with. I have the vendor contract database in front of me – Ericsson has been the winner here.

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