Ericsson shutters R&D center in China as market share suffers

China
China remains an important market for Ericsson, but geopolitical tensions are taking a toll. (Getty Images)

Ericsson is shutting down one of its five R&D centers in China, according to the South China Morning Post. The Swedish firm confirmed that it will divest its product research and development activities in Nanjing by November.

Employees at the center, said to total about 630, received a proposal to move to TietoEVRY, a Finnish software provider that has offices in China, according to the Post. Another source told the publication that Ericsson’s 5G factory in Nanjing, which was meant as a showcase of its 5G prowess, would not be affected.

The company acknowledged the move, saying it will work closely with TietoEVRY to ensure a successful transition.

“We are continuously committed to our customers and partners in Mainland China and remain committed to 5G development for this market and globally. Mainland China has always been and remains a very important market for us,” the company said in a statement provided to Fierce. 

“The market and customers' needs are constantly changing, and so is Ericsson,” the company said. “Ericsson is increasing its R&D investments within 5G and Cloud RAN and other emerging technologies, while it is reducing in legacy products in 2G, 3G and 4G. Ericsson will optimize the global R&D to improve the efficiency.”

Ericsson’s troubles in China started a long time ago. CEO Ericsson President and CEO Börje Ekholm pleaded with Swedish authorities last year not to ban Huawei from its supply chain, citing a desire to compete with any and all comers and the expectation that China would retaliate. In June, a Swedish court upheld a ban against Huawei selling 5G equipment in the country.

RELATED: Ericsson is caught in cross-hairs between China, Sweden

Ericsson repeatedly warned of expected market share loss in China, pointing to geopolitical tensions involving Sweden. In July the vendor won just 2% share for China Mobile and China Broadcasting Network’s 5G radio tender, down from 11% in 2020.

Still, just last week, Reuters reported that Ekholm was planning to double down in China. “We have been in China for 120 years and I don't intend to give up easily," he said in an interview with Reuters. "We are going to show that we can add value to China."

China & 5G

China has been at the forefront of deploying 5G networks and accounts for more than half of the equipment used globally for 5G, making it a critical market for telecom equipment makers, Reuters noted.

Indeed, Chinese operators are moving full steam ahead on their 5G deployments. China’s Ministry of Industry and Information Technology recently reported that 993,000 5G base stations have been deployed across the country, covering more than 95% of counties and 35% of rural townships.

China expects to have more than 560 million 5G users by 2023. The number of 5G mobile phone users already has exceeded 392 million, according to the ministry.

RELATED: China boasts 792K base stations for 5G

Analysts in the U.S. have cautioned about how China’s numbers are interpreted. Portions of China’s 5G user count are tied to “5G package” customers, rather than representing 5G handsets, and the “5G package” customers aren’t necessarily using 5G, according to the Seattle area-based Chetan Sharma Consulting firm.