Backlash

Backlash
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At the end of June, a Swedish court upheld a ban established by Sweden’s Post & Telecom Authority that was put in place last year against both Huawei (pvt) and ZTE (000063.CH).  This was the 2nd appeal made by Huawei after losing its 1st appeal late last year.  While Huawei has always competed with Sweden’s own 5G supplier Ericsson (ERIC), the ban, which was not supported by Ericsson, has had an effect on Ericsson’s prospects for selling 5G equipment in China, the globe’s largest 5G market.  It seems that China has decided that it will be buying less 5G equipment from Ericsson, now that the Swedish government has reinforced the ban, and Ericsson has indicated that it will be closing one of its R&D centers in Nanjing, offering to transfer all employees to another Swedish firm who has offices in Nanjing.  Roughly 600 employees are involved.
Ericsson will still have 4 other R&D centers in China and is expected to hold a 23% share of the global 5G equipment market this year (down from 26% last year) but saw a big drop in its Chinese business in 2Q and noted in July that it was no longer counting on a number of 5G tenders that it had expected to win before the tension between the two countries escalated.  While the company’s president and CEO still believes it can generate business in China, it will likely be facing far greater nationalistic challenges than last year.  According to Trendforce, the global mobile base station market will look like this at the end of this year.