Ericsson warns of Chinese retaliation over Sweden’s Huawei ban
Ericsson sales plunged in China as the Swedish telecommunications equipment maker warned it risked retaliation over Sweden’s ban on Chinese rival Huawei from building 5G networks in the Scandinavian countries.
Revenues generated in Asia’s largest economy in the second quarter fell from Kroner 4.1 billion ($ 470 million) a year ago to Kroner 1.5 billion, causing overall sales to plummet. Ericsson for the first time in three years.
Managing Director Borje Ekholm has warned that the group is likely to gain “significantly lower market share” in China in the future following Sweden’s decision last year to ban Huawei and ZTE due to fears of espionage and theft of technology.
Ericsson and many of its rivals are caught in the midst of a geopolitical struggle over the future of 5G networks. The United States has pressured its allies to follow suit and ban Chinese companies from their telecommunications networks, with officials in the administration of former President Donald Trump even launching the idea of ââtaking a stake in Ericsson or the Finnish group Nokia, the two main rivals. to Huawei.
But Ekholm was outspoken in his criticism of Sweden’s 5G ban, telling the Financial Times last year that it would restrict free competition and trade. The Wallenberg family, big investors in Ericsson and other Swedish blue chips, also criticized the move, fearing the fallout from the ban could spill over to other industries.
Some analysts have not predicted any future revenue for Ericsson in China. Ekholm warned on Friday that the Swedish ban on Huawei “could influence market share allocations,” many of which are expected later this year.
Ericsson shown what it was missing by improving its forecast for the Chinese telecom equipment market, saying it would grow 11% this year, from a previous estimate of 4%. This would bring global growth to 10%, from a previous forecast of 3%.
The Swedish group also pointed out that it achieved 10 billion crowns of revenue in China in the second half of 2020, underlining the extent of what it could lose.
Its difficulties in China came as it reported slightly lower second-quarter sales from SKr 55.6 billion in the same period a year earlier to SKr 54.9 billion. This missed analysts’ average forecast of SEK 57.2 billion.
Ericsson was also disappointed with its earnings, as underlying operating profits fell from 4.5 billion crowns to 5.8 billion crowns, missing analysts’ average forecast of 6 billion crowns.
The group’s shares fell 8% at the start of trading on Friday.