There are many players in the wireless infrastructure space, all battling it out for their stake in future 5G networks. However, two of particularly significant scale and market presence are Ericssonand Huawei . Will one conquer overall? Today I wanted to dive a little deeper into that question.
Does financial endurance to invest in 5G matter?
It’s no secret that Ericsson is struggling financially. In its most recent financial earnings report (back in September), the company registered negative year over year sales and operating income. Additionally, it was announced that up to 25,000 jobs could be eliminated outside of Sweden in order to wrangle in operating expenses. Huawei , on the other hand, continues to experience steady sales growth. Case in point—sales in 2015 were 591 CNY and jumped to 812 in 2016. Sales growth for 2017 slowed somewhat, but the company still posted a 15% increase for the first half of this year. From a headcount perspective, Huawei continues to hire at an escalating rate in an apparent effort to stay ahead of its competition. In my mind, financial strength matters. Ericsson will have to turn the ship towards profitability and growth waters, in order to continue the required investment in product development.
Ericsson recently announced what seems on the surface to be an impressive 5G patent application. Calling it an “end-to-end” submission, the filing combines the work of 130 Ericsson inventors and promises to include everything needed to build a complete 5G network. Huawei has made an ongoing pledge to spend $600 million on 5G wireless R&D (Research and Development) alone (dating back to 2013 and extending into 2018). The company is also one of Europe’s largest patent filers over the past 3 years. I’ve written about Huawei ’s investment in R&D in the past, and you can find that article here. I’ll call this one a dead heat with both Ericsson and Huawei making impressive commitments.
Does a global geographic footprint matter?
Ericsson is well entrenched in both the North American and global markets, and has established itself as a solid incumbent with most, if not all, tier one carriers. The Swedish company has invested significantly in development centers in the United States, such as the one recently announced in my hometown of Austin, TX—which, by the way, will be focused squarely on 5G. The company is also involved in various co-development efforts, such as the work its doing with the AT&T T +1.05%Foundry innovation labs (side bar: I’ve written previously about the AT&T T +1.05% Foundry effort—the article can be found here). Huawei , on the other hand, only derives 1% of its revenue in North America. However, the company is a powerhouse in the rest of the world, and has been making significant sales inroads in Europe, Asia and Africa. The Chinese company also provides incubator-like services to help smaller operators scale and deploy next generation wireless infrastructure. Still, I would give Ericsson the edge here, considering its global presence includes North America.
Time will tell the victor—I would say it’s probably too early to place a bet in the horse race between Huawei and Ericsson . One thing is certain in my mind, however: having both of these powerhouses pushing the 5G pace will greatly benefit the deployment of the next generation wireless network standard.