Posted on Jul 16, 2021 4:41 PM
Despite the high-speed rollout of 5G networks across the world, Ericsson reported financial results on Friday that disappointed investors. The Swedish group specializing in mobile telephony equipment reported a quarterly turnover in decline (-1%), for the first time in three years. The main reason is that the OEM’s sales fell by two-thirds in China – a shortfall of 240 million euros over the period.
The world’s leading telecoms market, China represents nearly 10% of Ericsson’s activity. The blow is brutal. And it is more structural than cyclical. “We do not really know the outcome of the calls for tenders [chinois, NDLR], but it is prudent to forecast a significantly lower market share in China, said Ericsson CEO Börje Ekholm. We know the geopolitical tensions with Sweden […] Don’t assume it will bounce back ”.
For the boss, Ericsson is a collateral victim of Huawei’s woes in the West. Suspected by Washington of being a Trojan Horse at the hand of the Chinese Communist Party to spy on or disrupt foreign telecommunications networks, the Shenzhen group has been the target since 2018 of unprecedented attacks by the United States.
They put pressure on their Western allies to join the anti-Huawei front. After Australia, Japan and the United Kingdom, Europe has largely closed its doors to the world’s No. 1 in telecoms. While many countries, like France, have banned Huawei de facto without showing it openly, Sweden has chosen to officially ban the Chinese equipment manufacturer on its 5G networks, for reasons of national security.
The boss of Ericsson had openly pleaded to keep the European markets open to his big Chinese competitor. The Swede feared being the victim of reprisals and seeing himself in turn closed the doors of the juicy Chinese market, well ahead of the deployment of 5G. Having been warned was not enough for investors. Friday, the title Ericsson fell 9% at midday, causing 3 billion euros in capitalization to vanish.