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Ericsson Invests $1B in China

Ericsson AB (Nasdaq: ERICY) is to invest $1 billion in China over the next five years in an effort to secure more than a third of that country’s 3G wireless infrastructure business.

The Swedish vendor today outlined its plans to grab a slice of the lucrative Chinese 3G market. The country has approximately 363 million mobile subscribers, which is only a 28 percent penetration rate compared to the total population. 3G licences are expected to be awarded in the first half of next year, a move that has generated huge interest from network equipment vendors (see Vendors Chase Chinese Riches and Global Vendors to Rule China?).

Ericsson is eager to play a major role in such activity. Speaking at the company’s Strategy & Technology Summit in Shanghai, Ericsson’s president of Greater China, Mats Olsson, announced plans for a $1 billion investment in the country between 2006 and 2010.

“The investment will focus on further expanding our manufacturing capabilities, the continuously rapid establishment of R&D centers, and also significant expansion of our service capacity and capabilities. In addition to this, there will be significant local purchasing for the global market.”

Olsson believes the Chinese 3G market will be worth “10 to 12 billion dollars,” and the vendor is keen to secure a 35 percent marketshare. This would give Ericsson a potential return on investment of up to $4.25 billion.

“Our ambition is to maintain a level of around 35 percent market share across 3G, and I think we are very well positioned for that. We have obvious critical mass, more mass than anyone else in wideband-CDMA. We will continue the R&D efforts, we have a strong local presence, and we are deeply embedded in the local telecoms industry.”

Ericsson is likely to face serious competition in its quest. As well as local players Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), the likes of Alcatel (NYSE: ALA; Paris: CGEP:PA), Nokia Corp. (NYSE: NOK), Nortel Networks Ltd. (NYSE/Toronto: NT), Lucent Technologies Inc. (NYSE: LU), Motorola Inc. (NYSE: MOT), and Siemens AG (NYSE: SI; Frankfurt: SIE) are also gearing up for battle.

“In China there are probably eight vendors with an ambition to play a role in 3G,” admits Olsson.

— Justin Springham, Senior Editor, Europe, Unstrung

schalk 12/5/2012 | 3:02:50 AM
re: Ericsson Invests $1B in China I am under the understanding that ZTE and Ericsson is working together in this regard, not against each other?

Can someone confirm or clear that up.

R
Schalk
lrmobile_justin 12/5/2012 | 3:02:49 AM
re: Ericsson Invests $1B in China Ericsson's partnership with ZTE is for the development of TD-SCDMA products only. TD-SCDMA is a Chinese homegrown 3G technology that is likely to be deployed by a sole carrier.

In contrast, globally proven W-CDMA technology is expected to play a larger role in Chinese network deployments, with 2 or 3 national W-CDMA networks likely to be deployed.

As a result, Ericsson will be battling ZTE (and everyone else for that matter) in the fight for W-CDMA contract wins. And that's where the real money lies.

Unstrung Justin
mobileIP 12/5/2012 | 3:02:35 AM
re: Ericsson Invests $1B in China Apparently ZTE actually has a R&D facility in Sweden so will be interesting to see if there are any other synergies further down the line.
nick_ed 12/5/2012 | 3:00:02 AM
re: Ericsson Invests $1B in China As my friend in China said TDS CDMA has a "dark future". All that happens looks like as attempt to draw attention of each other from real battle in 3G area. We will see who is more smart...
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