A move by China's government to classify Ericsson and Nokia as 'untrusted' vendors could upend the global telecom market.
Surveying China from the helm of Ericsson, Börje Ekholm saw a vast and fertile land in 2019, ready to sow with the crops of 5G. China accounted for about 60% of the global 4G infrastructure market, the CEO of the Swedish company told analysts, and there was no reason to think that figure would diminish with the new generation. Yet Ericsson's share of this huge Chinese market was a meager 10% at the time. Ekholm's mission was to grow it. "We want to be stronger in China in 5G than we were in 4G," he said.
Six years later, Ekholm is clinging on by his teeth like a trapeze act gone wrong. Ericsson's China sales did surge 18% in 2020, to almost 18.8 billion Swedish kronor (US$2 billion), as the company scooped a few 5G contracts with China Mobile, China Telecom and China Unicom, the giant, state-backed telcos. But a year later, after Sweden banned Chinese vendors from its own 5G market, revenues plummeted 46% in what smacked of Chinese retaliation. They have not recovered, and Ericsson is now facing the annihilation of its China business.
Many Western companies have never been allowed more than a nibble at China's domestic market, where local providers are massively favored. Yet China's government is suddenly on a warpath against both Ericsson and Nokia, its Finnish rival, according to multiple sources including senior figures at Nokia. Just as the EU has taken to describing Huawei and ZTE, two Chinese makers of network equipment, as "high-risk," so China now regards the Nordic companies as "untrusted" vendors, said John Strand, the CEO of Danish analyst company Strand Consult.
The upshot is that the few scraps of work given to Ericsson and Nokia may soon be yanked away. "Western suppliers, which is only us and Ericsson, have 3% market share now in China and it's been coming down and we are going to be excluded from China for national security reasons," said Tommi Uitto, the president of Nokia's mobile networks business group, at a recent press conference in the Finnish city of Oulu. Approached by Light Reading after those remarks were aired, Ericsson declined to comment.
Much like Ericsson's, Nokia's China business appears to have shriveled dramatically. In 2018, Nokia booked almost €2.2 billion ($2.6 billion) in sales of core, fixed, radio access and transport network technologies to "Greater China," which covers the Chinese mainland, Hong Kong and Taiwan. Last year, the amount had dropped to just €1.1 billion ($1.3 billion), and it has continued to shrink in 2025. Nokia's sales in Greater China for the first half fell 23% year-over-year, to €437 million ($514 million). Ericsson's sales in China sank as much as 47%, to SEK3.9 billion ($420 million).
(Note: Nokia includes sales to Taiwan in its Greater China figures; Source: Ericsson, Nokia, Light Reading)
It is tempting to play down the significance of a Chinese ban or even dismiss it. Ericsson and Nokia never had a very big share of the Chinese market, and the sales data proves that China has been cutting expenditure on European network equipment for years. Like numerous other European and US companies, Ericsson and Nokia were denied a fair allocation of contracts within China long before the latest news surfaced, said Strand.
But the loss of business in China matters for several reasons. For a start, as small as 3% market share divided between two players may seem, China was still one of Ericsson's top five countries by sales last year, accounting for about 4% of total company revenues. Nokia owed nearly 6% of its revenues to the Greater China region. This $2.4 billion in combined sales, minus what Nokia sells in Taiwan, would be hard to replace.
A related sore point for Nokia is that Huawei and ZTE still enjoy seemingly unfettered access to various European markets, despite the efforts of the EU and US authorities to banish them. A senior executive at Nokia estimates Huawei's share of the radio access network (RAN) market in Germany, Europe's biggest economy, is still about 60%. The figure tallies with data from Strand Consult, which also shows that 22 European countries were using 5G network products from Chinese vendors at the end of last year.
All that recently prompted Justin Hotard, Nokia's newish CEO, to ask why European governments still allow Chinese vendors to play such a big role in their markets when Ericsson and Nokia face eviction from China. Yet even if the region's governments were much tougher on Huawei and ZTE, Nokia would probably struggle to compensate in Europe for the loss of its contracts in China.
That might not be obvious to an outsider. The EU, while much smaller than China, covers about 4.2 million square kilometers and is home to more than 450 million people, giving it a far bigger population than the US, with its roughly 340 million inhabitants. As a single market, it should be a large and attractive one to network vendors. According to Strand Consult's data, however, it represents as little as 8% of global spending on the RAN, which accounts for a big percentage of telcos' total network investments. Last year, that would have been about $2.9 billion.
Most of that is already spent on Ericsson and Nokia, as well. While parts of the EU remain enthusiastic buyers of Huawei's network products, some have banned it. In others, the market is more evenly split between Huawei, Ericsson and Nokia, with Samsung increasingly active in a few countries. The Nordic and South Korean vendors would be fighting over any contracts that Huawei loses. They might also encounter a challenge from Fujitsu and NEC, two Japanese vendors cited by Uitto as examples of new RAN competition.
Other, more dramatic changes would probably be needed to make Europe look more attractive to RAN vendors in a post-Huawei future. "In Europe, where we are probably 400 or 500 million people, we have like 80 operators," said Uitto, drawing an unfavorable comparison with China and the US. "Take Denmark as an example. They have four operators for a country of 5 or 6 million people. It's madness."
"The regulation in Europe is such that operators are too many," Uitto continued. "There are too many operating licenses, and then they have such fierce competition that their prices are extremely low. They cannot invest in anything that would be differentiating, and they can't invest in the networks in a proper way. And that, of course, hurts us."
If this sounds like the usual grumbling about regulators by a company that has struggled to boost profits, analysts tend to agree that Europe has badly trailed China and the US on the rollout of more advanced 5G services. Ericsson's last mobility report in June also showed that 5G coverage provided by higher-speed "mid-band" spectrum was just 50% in Europe compared with 90% in North America and 95% in both China and India.
But a concerted government attempt to obliterate what remains of Ericsson and Nokia in China has other ramifications, too. Many years ago, China was derided as a technology laggard, home to equipment makers that ripped off Western innovation. These days, it is acknowledged as a powerhouse. Its operators have arguably deployed the world's most advanced 5G infrastructure and are even now investing in pre-6G technologies like early versions of integrated sensing and communication.
Access to China, therefore, brought Nordic vendors into contact with commercial deployments still deemed futuristic in the West. From a research and development perspective alone, the value of that access was prized. "There are trial costs and unique developments where we need software engineers focused on those tracks for Chinese operators," said Fredrik Jejdling, the former head of Ericsson's mobile networks business group, in October 2019 about the investments he was making in China at the time. "Part of it is unique for the demands in China."
Exclusion from such an advanced market, then, could be a technological setback for both Ericsson and Nokia. The other concern is that a growing rift between China and the West will be felt in other parts of the world. With the US pressuring its allies to ban Huawei and ZTE as "high-risk vendors," China could in turn lean on countries to classify Ericsson and Nokia as "untrusted" suppliers.
The worry is not about the countries in China's political orbit, like Iran, North Korea and Russia, where the Nordic vendors are not prepared to do business. It is over what Strand calls the "gray area" countries. "It's almost like a battle between the West and China for influence," he said. 'I'm talking about parts of Latin America, parts of Africa."
In certain Latin American countries, especially, competition between the European and Chinese vendors remains fierce, and authorities have not made overt moves to ban specific companies. In Colombia, for instance, Strand Consult's research shows Claro is the only mobile operator that does not use Chinese network products, while Movistar, despite being owned by Spain's Telefónica, relies on them for between 60% and 70% of its sites. In July last year, Ekholm complained about "sharply increased competition from Chinese vendors in Europe and Latin America."
Partly through its Belt and Road Initiative, China has been able to amass sufficient economic influence to threaten countries that are contemplating whether to ban Huawei and ZTE. Indeed, the risk that China will stop buying German cars, machine tools and other exports – the value of which came to about €90 billion ($105.8 billion) last year – is probably what has stopped Germany's government from imposing an outright ban.
But as countries fall into line with either Chinese or US policy, the telecom market could start to look even more like a dual system. In the China camp, as in China, operators warned off using Nordic vendors would have a choice of Huawei or ZTE. In the West, their main options would be Ericsson, Nokia and Samsung. Inevitably, that would make cleaving to a single international standard much harder. Even if 6G remains globally intact, the pace of its deployment could depend on where a country fits in the new geopolitical order.
Four years ago, Ekholm warned Light Reading that fragmentation could produce a tech world of two ecosystems, in which the Chinese ecosystem would be "formidable competition for the West." The complete disappearance of his company and Nokia from China would bring that world a little closer.
You May Also Like
