Amid the escalating tensions between the USA and China over 5G and the mobile networks supply chain, which have led to significant western market sanctions on Huawei, Ericsson has continued to win contracts in China.
Its presence in the 5G deployments of the three Chinese MNOs is certainly far smaller than those of Huawei and ZTE, but it has not been frozen out. One reason, of course, is that Ericsson is not American, but there had been speculation that China would push its operators to adopt a China-first procurement policy to protect its embattled suppliers, which would have hit all western providers.
The other reason is that Ericsson seems to have technology that the Chinese MNOs particularly want, and has managed to commercialize it a bit earlier than Huawei or ZTE. Two years ago, that technology was its 5G-ready, software-defined base station, which it credited with increasing its market share in China in 2018. The software-upgradeable Ericsson Radio System (ERS) secured early wins in China and accounted for 84% of the firm’s RAN sales in 2018.
In 2020, the goose with the golden egg is DSS (dynamic spectrum sharing), an important element of the 5G standards for many operators, and one where Ericsson has stolen a march on its rivals. As with software-upgradeable 5G, the other base station suppliers insist they have the technology too, but have not demonstrated commercial readiness, while their Swedish rival has already announced large-scale trials and contracts, from the USA to The Netherlands to Switzerland.
And now China, where China Telecom and China Unicom are deploying ERS together with Ericsson Spectrum Sharing, the vendor’s own implementation of the DSS standard. ERS will underpin the two operators’ 5G NR Standalone build-out, with DSS allowing them to tap into both 5G and 4G spectrum bands on a flexible basis according to traffic requirements at any one time.
The main bands supported in the first instance will be 3.5 GHz, including solutions using 200 MHz wideband systems for very high data rates; and 2.1 GHz, which can be used flexibly for 3G, 4G and 5G signals. The wideband aspects are especially important because the two operators are building a shared network, and so it will need to support heavy traffic loads in many areas.
China Telecom has also selected Ericsson’s 5G Core portfolio, which includes cloud-native packet core, unified data management and policy products, all deployed on the vendor’s NFVi together with Ericsson Dynamic Orchestration.
The two operators awarded the bulk of their recent 5G RAN contracts to Huawei and ZTE, with each obtaining about 36%, while Ericsson gained about 18% and China’s Datang Mobile Communications just over 10%. Nokia missed out on the most recent wave of awards from all three major Chinese operators.
However, the Chinese operators seem keen to preserve some diversity in their supply chains, despite geopolitics. While 5G capabilities like DSS and smooth migration look like key decision factors in selecting Ericsson, the vendor has also, in recent years, been willing to compete on price with the local suppliers. In the past, it was always assumed that Huawei and ZTE undercut their competitors on price, but in 2018, insights shared by China Unicom revealed that Ericsson sometimes sold more cheaply than its Chinese rivals, even in their home country.
According to a Unicom tender document for 4G base stations, Ericsson priced its products at RMB21bn ($3.1bn), 25% cheaper than Huawei’s tender and 22% below ZTE’s. Nokia was the highest-priced on RMB34.7bn.
Edison Lee, an analyst at Jefferies Hong Kong, said this shows how ZTE, in particular, no longer competes on price alone because the quality of its products has steadily improved. Indeed, in 5G, and particularly in key enablers like Massive MIMO, the Chinese vendors are often ahead of their rivals in advanced technology.