Recently, the head of Ericsson’s network division commented on the commercial impact of the closure of a Chinese factory due to a corona virus outbreak, and the withdrawal from this year’s Mobile World Congress (MWC).

 The epidemic has limited impact on Ericsson and launches “dual supplier” strategy

Last week, the Swedish equipment maker’s Nanjing plant and other production facilities in China were reopened after being forced to close. Fredrik Jejdling, head of Ericsson’s largest business unit, said in a conversation with Light Reading: “We reopened on Monday, February 10, and have been at full capacity ever since. We have contingency plans and we don’t see any impact. So far, we think it can be recovered. ”

During the closure of the Nanjing plant, Ericsson responded to the outbreak of the coronavirus by increasing production at its Tallinn plant in Estonia. The company’s contingency plan includes a “dual-supplier” strategy to ensure that if the coronavirus causes further damage, the company’s critical device supply will not be affected.

At an Ericsson analyst and media briefing in London last week, Jejdling said: “Unless there is a problem with the supply of devices on the Chinese side, we can solve the problem through supply. After all, we usually have dual suppliers. In this emergency, it’s often difficult to predict accurately, but we think we can handle that. ”

The plants in Nanjing and Tallinn represent Ericsson’s two main production bases around the world. Ericsson is now focusing on investing in a third plant near Dallas in the United States to serve North American customers. The highly automated Texas plant has only 100 employees, and Ericsson is introducing similar advanced technologies to its European and Chinese plants to increase efficiency. Ericsson has invested SEK 500 million (US $ 52 million) in each plant to support automation.

Although Jejdling did not say what this would mean for the number of employees, Ericsson’s goal is to increase its operating profit margin from 9.7% last year (excluding restructuring and other expenses) to 12% -14% by 2022, and expects the addressable market will grow at a compound annual growth rate of 2% during this period. In the past two years, the company has cut about 12,000 jobs, partly because of divestments.

Jejdling said that automation will change the composition of the labor force, the company is introducing different staffing, blue-collar workers will be less, but at the same time will create new white-collar jobs. In the United States, for example, the company will introduce new engineers to build new products for building millimeter-wave radios.

Exiting MWC is no less risky than taking risks

Ericsson became the first major network equipment supplier to withdraw from MWC this year on February 7. Officials announced the cancellation of the event on February 12 after other large exhibitors and service providers also withdrew.

In the face of criticism that Ericsson’s exit would have a ripple effect, Jejdling defended it on the grounds of security and said that Ericsson was not sure whether it could recover its MWC investment. He told Light Reading: “Part of the investment may be recovered and part of it cannot. When we make a decision, we are not thinking about costs, but we are responsible for employee safety.”

According to MWC’s terms and conditions, Ericsson may not be able to recover its exhibition and appearance costs. Ericsson did not disclose how much money it would lose from exiting the show.  As for the cancellation of MWC’s business impact this year, Jejdling believes that a coronavirus outbreak at the show will be more serious. When asked what the cancellation of the incident means to the industry’s growth this year, he said it was difficult to say, but thought that if an outbreak occurred during the event, it would have a greater negative impact.

Ericsson, when announcing its withdrawal from MWC, stated that it will hold more regional events this year to showcase its products and technologies planned to be displayed at MWC, thereby reducing market impact.

“This is not an easy decision for us to make,” said Stella Medlicott, chief marketing officer of Ericsson at an event in London last week. MWC attracted more than 100,000 people and at the booth alone we attracted 10,000 visitors in four days. Despite the risks is small, but we don’t think we should take risks. “