BARCELONA — As long as there have been mobile phones, Ericsson has dominated the global market for equipment for wireless telecom networks, selling the biggest share of gear to mobile phone operators around the world. But last year something happened that even the longtime market leader, based in Stockholm, had never faced.
A competitor, Huawei of China, pulled even in overall sales.
The rivals have different business mixes — Ericsson makes 43 percent of its sales by managing wireless networks, while Huawei also sells smartphones and corporate communication grids. And excluding those side businesses, Huawei’s sold $25 billion of equipment to operators last year, 29 percent less than Ericsson, which remains the biggest seller of key components like data and voice lines and routers, according to Dell’Oro, a research firm in Redwood City, California.
But Huawei, an upstart founded in 1987 initially to resell telephone switches in rural China, has become a global peer of equal scale, matching Ericsson with $35.7 billion in total sales.
Momentum for the time being appears to be with Huawei, whose profit rose 33 percent last year, to 15.4 billion renminbi, or $2.5 billion, as sales rose 8 percent to 220.2 billion renminbi, according to preliminary, unaudited figures from the company, based in Shenzhen. In the same period, Ericsson’s profit fell 53 percent, to 5.9 billion Swedish kronor, or $919 million, as network equipment sales dropped 11 percent, to 117.3 billion kronor.
Hans Vestberg, an Ericsson employee for 25 years who has been chief executive since January 2010, led the company’s diversification into network management, an outsourcing business that has helped Ericsson offset its equipment rivalry with Huawei. During an interview, Mr. Vestberg declined to discuss Huawei directly but noted that Ericsson had hundreds of competitors, depending on the type of equipment, the type of customer and geography.
Even so, remaining the overall market leader is important, he said.
“Ericsson has been the market leader throughout its 136-year history, and my job I guess is to make sure we hold on to that for another 130,” Mr. Vestberg said.
Product innovations, like antenna-integrated radio, or AIR, an antenna for a cellphone base station that has the radio transmitter built directly into the aerial to save space, electricity and cost for network operators, will keep Ericsson on top, he said.
But the rivalry, because of the increasingly strategic value of global communication networks, also has a significant geopolitical dimension. Amid national security concerns, the U.S. market for operator equipment has been essentially closed to Huawei, which was founded by Ren Zhengfei, a former engineer with the People’s Liberation Army.
The largest U.S. operators have not bought from Huawei, and, last October, the U.S. House of Representatives Select Committee on Intelligence recommended that they continue to avoid purchases from Huawei and another Chinese vendor, ZTE.
The House report, which followed hearings with Chinese company executives, concluded that Huawei had not supplied the requested information on its relationship with the Chinese government and a group of 10 state-owned Chinese banks that were among Huawei’s commercial lenders. The bipartisan panel, in its public report, concluded that Huawei was an extension of the Chinese government, using public subsidies to underbid and win business.
“Based on available information, the committee finds that Huawei receives substantial support from the Chinese government and Chinese state-owned banks, which is at least partially responsible for its position in the global marketplace,” according to the report.
A senior executive at an American maker of network equipment said he believed Huawei to be a de facto arm of the Chinese government, receiving preferential subsidies and support that had allowed it to undercut Ericsson and the other suppliers of equipment, Alcatel-Lucent and Nokia Siemens Networks, to build its market share.
Article source: http://www.nytimes.com/2013/02/25/technology/ericsson-finds-a-chinese-rival-hot-on-its-heels.html?partner=rss&emc=rss
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