Ericsson Plans to Restructure Business in China After Revenue Plummeted 74%
On October 19, Borge Eckholm, President and CEO of Ericsson, revealed that the company’s revenue from the Chinese market plummeted by 74% in the third quarter. The company is now planning to restructure its business in China starting in the fourth quarter.
According to the third quarterly report of 2021, the Swedish telecommunications company earned 1.3 billion Swedish kronor ($150.7 million) from July to September within the Chinese market, a number that is 74% lower than the same period of last year. This is the second consecutive quarter that Ericsson’s sales in China have fallen sharply. From April to June, the company’s revenue in China was 1.5 billion Swedish kronor, down 63% year-on-year.
Although Ericsson’s sales in America and Europe increased by about 10% in the third quarter, this still can’t completely offset the slump in the Chinese market. According to the financial report, Ericsson’s total revenue in the third quarter was 56.3 billion Swedish kronor, down 2% year-on-year, and its net profit was 5.8 billion Swedish kronor, up 4% year-on-year.
In March this year, Ericsson pointed out in its annual report that the deterioration of Sino-Swiss relations may cause collateral damage. The company also added in the second quarter report that it was worried that China might take measures against “the economic interests of Sweden and Swedish industries, including Ericsson’s interests”.
Huawei and ZTE, the Chinese telecom equipment companies, were the two successful candidates in a network tender worth 7.5 billion yuan ($1.16 billion) recently disclosed by China Mobile, while Ericsson won nothing. In Borge Eckholm’s view, this was the result of Sweden’s decision to exclude Chinese suppliers from Sweden’s 5G network construction.
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At the third quarter performance, Eckholm went on to say, “As the sales in China continue to decline, we must adjust the size of our sales and delivery team in China from the fourth quarter. In the short term, we need to adjust the cost structure to an appropriate scale as much as possible.” He did not give further details, but said there will be some “restructuring costs” in the fourth quarter as the company shrinks staff numbers and its business size in China.
At the end of September this year, Zhao Juntao, President of Ericsson China, revealed in an interview that the company has more than 10,000 employees in China. In response to the report in September that “Ericsson Nanjing R&D Center was collectively dissolved” in early September, he said that the Nanjing Center mainly did R&D work of 2G/3G/4G, and the cut was mainly to optimize R&D structure and investment on 5G.