The overall 5G business in China is expected to have a healthy profitability and is in line with our plans
Ericsson has increased its footprint in China through 5G contract awards from all three major operators in China. The strengthened market position is strategically important for Ericsson as this will generate scale advantages and strengthen Ericsson's position in the world's largest 5G market, which is expected to be an important driver of critical future requirements and new feature developments.
Overall, Ericsson's 5G business in China is expected to have healthy profitability over the life of the contracts. However, the margins during the second quarter of 2020 are expected to be negative due to high initial costs for new products.
In the Q1 2020 earnings report we communicated that an increasing share of strategic contracts was expected to weigh negatively on profitability in the second quarter 2020 primarily driven by temporary negative gross margin in China. In addition, the second quarter will be impacted by a cost of around SEK 1 b. related to asset write-downs of pre-commercial product inventory for the Chinese market. The cost will be reported in segment Networks, impacting gross margin.
While the deployment of 5G in China will continue to be dilutive to Segment Networks gross margin short-term, it is expected to contribute positively to gross and operating income from the second half of 2020 and in line with the business plan be profitable over time.
With current visibility we maintain the financial targets for 2020 and 2022.
The Insight Partners is a one stop industry research provider of actionable intelligence. We help our clients in getting solutions to their research requirements through our syndicated and consulting research services. We specialize in industries such as Semiconductor and Electronics, Aerospace and Defense, Automotive and Transportation, Biotechnology, Healthcare IT, Manufacturing and Construction, Medical Device, Technology, Media and Telecommunications, Chemicals and Materials.
Severity: Warning
Message: count(): Parameter must be an array or an object that implements Countable
Filename: amp/news_details_amp.php
Line Number: 252
Backtrace:
File: /home/smartmarketnews/public_html/application/views/amp/news_details_amp.php
Line: 252
Function: _error_handler
File: /home/smartmarketnews/public_html/application/controllers/Amp_controller.php
Line: 41
Function: view
File: /home/smartmarketnews/public_html/index.php
Line: 315
Function: require_once
Smarter Decisions with Smart News
Smart Market News is committed to getting its readers the latest updates and insights on industries that help in making “smarter” business decisions. With insights and inputs from corporate decision makers, we bring you the stories of adopting innovative solutions and strategies that have been changing the world. Our editorial insights on products, solutions, companies, and adoption of best practices not only help in understanding the markets better, but also prove to be a complete package for your information needs.
media@smartmarketnews.com | sales@smartmarketnews.com
Contact Us