- Tariffs are still on the mind of Ericsson executives
- The CEO said that defense and mission-critical applications are key for 5G expansion
- The vendor will invest more in India and Japan
On its second quarter earnings call, , Ericsson executives said that President Trump's tariffs had not really had a dramatic impact yet but they are expecting to make changes if and when they do hit.
Talking about tariff mitigation, the executives said that everything is still up in the air right now. "It is very much around the supply chain and sourcing," said CFO Lars Sandstrom during the Q&A portion of the call. "We have not made any firm decisions given the uncertainty in what's actually going to happen, but we are preparing to see how can we move."
"We built a factory in the U.S. that came online about 2020," said CEO Börje Ekholm. "We kind of saw this coming during the first Trump administration." He said that the stateside factory gives Ericsson much more flexibility as regards tariffs.
The CFO noted during the call that Ericsson had already seen 1% impact or "a little lower" from the tariff announcements so far. "We expect similar levels going forward given what we know today," the CFO said.
So, like many other companies, Ericsson — while not explicitly saying it — appears to expect the Trump admin to keep backing out of the tariff threats and rolling back deadlines. We shall see if that continues to hold true. Trump threatened a 30% tariff against the European Union on Saturday, of which Ericsson's home market, Sweden is a member.
5G SA, slicing and FWA
Ekholm continued to be optimistic about 5G standalone (SA) despite the achingly slow adoption by operators outside of China. The CEO estimates that only around a quarter of operators have so far switched to a 5G SA, rather than one that uses 5G radios run on a 4G control plane.
The CEO noted that fixed wireless access (FWA), as well as enterprise-focused applications like network slicing and 5G APIs, all benefit from the low latency offered by 5G SA. He noted that an operator in the U.S., which is presumably T-Mobile, and an operator in India, which is likely Airtel, have both launched nationwide 5G SA so far.
“It is now encouraging to see customers with 5G SA coverage actually offering service innovation like network slices for mission-critical applications,” Ekholm said. Fierce should note Verizon has now said it is offering a nationwide first responder slice, just like T-Mobile in the U.S.
Defense and regionality
"There is a big opportunity for 5G in defense," Ekholm said. "A large part of the increased defense spending in Europe will most likely go on connectivity," the CEO stated. He expected that any of that revenue will go to Western vendors (read Ericsson and Nokia) rather than say Huawei and ZTE.
Ekholm also during the Q&A session that the U.S., India and Japan will continue to be important markets for the Nordic vendor, followed by the U.K. and Australia. "We're already strong in North America, we can do more in India and Japan," the CEO said.
Ericsson's Q2 numbers
Ericsson's operating profit, excluding restructuring charges, was 7.0 billion crowns ($728.5 million) against a year-ago loss of 11.9 billion. The vendors shares were down 7.66% after the Q2 report.