Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Ericsson in China: From Cool to Cold

By Bruce Einhorn For Ericsson and other wireless giants, China was supposed to be the one bright spot in a gloomy landscape. It has more mobile-phones users than any other country in the world -- the most recent total is upward of 190 million. And the Chinese market is still growing, with about 5 million mobile subscribers signing up each month.

Yet as CEO Kurt Hellstrom and other Ericsson executives try to reverse the company's sharp slide (see BW Int'l Cover Story, 11/04/02, "Saving Ericsson"), they're suffering disappointing setbacks in the Middle Kingdom. "I don't think there has been a worse time for Ericsson in the China market," says Craig Watts, an analyst with Norson Telecom Consulting in Beijing.

It might be tempting to dismiss Ericsson's China problem as unique to the Swedish company, as yet another sign of its failure to keep up with the times. But the difficulties it faces are shared by other, more successful companies, too -- though Ericsson's woes are more severe. As the competition in the China market gets more intense, executives from Nokia, Motorola, Siemens, and Samsung would be wise to look at, and learn from, Ericsson's China experience.

LOST LEADERSHIP. The most obvious problem has been the collapse of Ericsson's handset market share. In the mid- to late-'90s, the company was one of the leaders among Chinese consumers, along with Motorola and Nokia. Today, Ericsson is barely on the radar screen. At the end of 2001, it had about 5% of the market, and by the middle of 2002, that tumbled below 2%, according to Watts. The Swedish outfit not only trails Motorola and Nokia but also Siemens and Samsung.

Chinese buyers once considered Ericsson handsets cool. It and other foreign companies didn't have to worry much about domestic rivals, since Chinese handset makers weren't competitive. But Ericsson didn't keep up with the latest fashions, and consumers came to see its products as ho-hum.

Moreover, the local players are no longer playing dead. Indeed, Chinese rivals increasingly are turning out stylish and inexpensive phones. One sign of the times: Ericsson has even fallen behind China's TCL, the up-and-coming electronics company from southern Guangdong province that has recently been making a major push to take market share (see BW Cover Story, 10/28/02, "High Tech in China").

TOO PRICEY? Of course, it hasn't helped that the handset joint venture Ericsson formed with Sony ran into delays in entering the Chinese market. In August, Sony Ericsson finally received Beijing's approval to operate on the mainland. Now it's trying to make up for lost time by selling fancy new handsets with color screens that can handle multimedia messaging services, which allow users to send not just black-and-white text messages to each other but also color pictures.

Ericsson's Beijing-based spokesperson declines to reveal how Sony Ericsson's sales have been doing since the summer launch. But the price tag is an eye-popper. The T68ie model sells for just under $400, which is a lot of money for a handset in any market, let alone in China.

Ericsson still has a commanding position in China's cellular-equipment market. It had a 31% share of the global system for mobile communication (GSM) equipment market in the first half of 2002, which translates into $434 million in sales. Last year, Ericsson had 25% of the market, but the overall market was hotter, so last year's 25% meant $1.5 billion in sales.

LOCAL COMPETITION. Yet here, too, Ericsson seems to be losing momentum. In the mid '90s, it was an early mover and well-positioned. "Basically the market belonged to them," says Watts. "They just got in here with more muscle and the market was theirs."

China has had a fundamental change, however. Local equipment manufacturers, once sideline watchers, are now players. Companies such as Huawei Technologies and ZTE, each a private-sector equipment makers based in the southern city of Shenzhen, have become fierce rivals (see BW, 10/28/02, "High Tech in China"), and that means that Ericsson is steadily losing ground.

"We have just seen an erosion," says Watts. "The domestic makers are on their heels and are a lot cheaper." Ericsson is still winning contracts -- it just got a $150 million deal from China Unicom, for instance -- but the competition is much stiffer.

Whether it's TCL selling cheaper handsets or ZTE selling cheaper base stations, Chinese companies are making their bid to take command of the Chinese market from foreigners such as Ericsson. That means CEO Hellstrom has his hands full -- north, south, east, and west -- as he tries to turn around Ericsson's fortunes. Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BusinessWeek Online

blog comments powered by Disqus