Ericsson announced plans to reduce its operations in China after suffering a big sales drop in one of its biggest markets due to retaliation for Sweden’s ban on China’s Huawei from selling 5G networks in the country.
Sweden banned China’s Huawei from selling 5G gear in the country a year ago and Ericsson has since lost most of its share in the latest rounds of telecom tenders in China.
The proportion of revenue Ericsson earns from China has dropped to around 3 percent of the total from 10-11 percent, Chief Financial Officer Carl Mellander said in an interview.
Mellander said the decline started in the second quarter and would show as a year-on-year loss until the same period of next year.
China sales declined by 3.6 billion Swedish crowns ($418.14 million) in the third quarter alone and the company is now planning to reduce its sales and delivery organisation in the country.
The reduction in China marks a small retreat for the company that has been in the country for over a hundred years. Chief Executive Borje Ekholm had last month vowed to double down on efforts to regain market share in China, Reuters reported.
Ericsson did not indicate a job reduction in China, the home of Huawei and ZTE.
Ericsson, a rival of Nokia, said the global supply chain issues had started to bite. In Q3 we experienced impact on sales from disturbances in the supply chain, and such issues will continue to pose a risk,” CEO Borje Ekholm said in a statement.
The company was not able to deliver certain hardware to its customers due to chip shortage at suppliers, coupled with logistics problems, leading to a drop in revenue, Mellander said.
Securing 5G contracts from all three U.S. telecoms — Verizon, AT&T and T-Mobile — has helped the company to absorb the losses in China. Ericsson said its total revenue fell 2 percent to 56.3 billion crowns in Q3.