As U.S. and China Clash Over 5G, This Swedish Company Could Be the Big Winner

As the U.S. clashes with Chinese tech company Huawei—a key player in the rollout of 5G—one Swedish company is positioning itself to thrive.

Stockholm-based Ericsson, the telecoms giant well-known for its former ties to Sony, has been building 5G contracts across the world while staying under the radar during ongoing disputes between the Trump administration and Beijing.

Experts say it is a company that stands to benefit from the U.S. government's hardline stance against Huawei, which has been branded a national security risk by politicians and placed on a trade blacklist that is restricting its access to key components.

"Ericsson has carefully put itself into an advantageous position across vastly different political environments," Xiaomeng Lu, senior policy manager and China practice lead at consultancy Access Partnership told Newsweek this week. "The Swedish telecom equipment maker has emerged as a clear winner of this geopolitical clash."

"The U.S. government's aggressive efforts to block Huawei from one of the largest telecom... markets in the world effectively boosted opportunities for Ericsson," Lu added. "It [is] regarded as a trusted supplier of quality alternatives."

The next generation of wireless technology, the next step up from 4G, will allow faster speeds, boost network capacity and reduce lag, promising to let people download HD movies in seconds while being used to power internet-connected devices.

It is now being tested in multiple cities around the world, however the infrastructure for the network is still being built and 5G remains in its infancy.

5G development has blossomed in China and officials recently claimed they are still on track to construct 500,000 new 5G base stations in the country by the end of this year, despite disruption to the economy caused by the COVID-19 pandemic.

Huawei is one Chinese company leading the charge, recently unveiling a new chipset, the Kirin 990, that will power its suite of (also outlawed) 5G-enabled devices.

Such technology will have to become widespread before proper 5G networks become a reality across the world, and Huawei's business took a major hit this month after the U.S. slapped restrictions on foreign plants where such chips are created.

Domestically, officials have warned that letting Huawei operate 5G networks in the U.S. could jeopardize communications infrastructure. "We cannot allow information to travel across networks if we do not have confidence that it will not be hijacked by the Chinese Communist party," US secretary of state Mike Pompeo said in February.

The same month, attorney general William Barr said China's 5G dominance will leave the U.S. economic future "at stake," The New York Times reported. He noted Huawei and ZTE, both Chinese firms, claim 40 percent of the 5G infrastructure market.

At the start of this year, U.K authorities decided Huawei tech could be used in its 5G networks with some key restrictions—prompting then White House acting chief of staff Mick Mulvaney to say the U.S. was "very much concerned" and warn that the sharing of security information between the two countries would have to be reviewed.

Amid this chaos, Ericsson has been expanding.

As of today, the company boasts 36 live 5G networks across 21 countries, amassing more than 90 commercial deals, including with AT&T, Sprint and Verizon. Public contracts show has operated in Europe, the Middle East, Africa and Asia.

Ericsson's trick has been its ability to offer companies ways to "evolve" their systems from 4G to 5G using "spectrum sharing" software and 5G-enabled radio hardware that lets operators exploit frequency spectrums as they become available. Essentially, it aims to give customers with an all-in-one platform to easily make the switch to 5G.

The renewed focus on 5G network equipment appeared to be paying off on the balance sheet, too, with Ericsson beating profit estimates in Q1 2020, Reuters reported.

Of course, Ericsson is only one of many companies operating in the space, with rivals including Cisco, Nokia and Qualcomm each pushing their own services.

Broadly, experts said every company stands to benefit from the stress being placed on Huawei, which this week described the U.S. restrictions as being a "stranglehold" on its business. But even inside China, Huawei doesn't hold a monopoly.

It appears Ericsson has made inroads there, too. On May 18, it said China Telecom and China Unicom selected the firm as a 5G radio access network (RAN) vendor.

"In China, Ericsson keeps a low political profile and is still winning 5G contracts from all three Chinese telecom operators, as these buyers prefer not to be locked in with Huawei-only solutions," Access Partnership's Lu told Newsweek.

Those technological inroads are being made despite the frosty diplomatic relationship between Stockholm and Beijing, which has boiled over in recent months and culminated in the termination of cultural exchanges and partnered cities in Sweden.

A catalyst for the deterioration was the jailing of Gui Minhai, a Chinese-born Swedish book publisher sentenced to 10 years in prison by China back in February for "illegally providing intelligence" to overseas parties, as the Financial Times reported.

Minhai, who printed material critical of the Chinese government before going missing from Thailand in 2015, was awarded a freedom of speech award in November last year in a ceremony attended by Sweden's culture and democracy minister, prompting fury from China's embassy in Stockholm, The Guardian newspaper reported.

Multiple regions in Sweden, including Gothenburg, Västerås and Linköping, have since scrapped cultural programs and twin-city "friendship" agreements with China.

Kester Mann, director of consumer and connectivity at market research company CCS Insight, told Newsweek Huawei's issues offer Ericsson a "clear opportunity."

"The Swedish company has had a torrid few years but sees 5G as an opportunity to regain market share and re-establish a leadership position in the supply of mobile network equipment. Ericsson has been in bullish form of late, talking up multiple 5G credentials and achievements and trumpeting strong investment in R&D."

The International Data Corporation (IDC) forecasts global 5G connections will grow from roughly 10 million in 2019 to 1.01 billion in 2023. It stresses that, despite testing, some 5G features are still three to five years from being on "commercial scale."

Ericsson declined to comment on its competitors or any future of its future contracts, but said it had seen "great interest" from mobile operators.

"As a global company with business in 180 countries, Ericsson continuously follows the development of national legislation in order to analyze the potential impact on the company and if any measures are required to comply," a spokesperson said.

"Ericsson is aware of the additional restrictions towards companies designated on one of the U.S. export control watch lists, the Entity list. Ericsson is not designated on this list and therefore these changes have a very limited impact on us."

Jimmy Jones, telecoms expert at security firm Positive Technologies, told Newsweek that Ericsson could soon emerge as one "major benefactor" in the U.S.

"But globally, all the non-Chinese alternatives to Huawei are almost certainly set to benefit," he stressed. "The clash between the U.S. and China, plus the delivery of 5G taking telecoms from critical infrastructure to potentially critical to every industry, has prompted huge discussion and reassessment of where we are.

"While the U.S. administration is the most vocal, their allies elsewhere are also doing much the same, which is an opportunity for Ericsson... to take advantage of.

"Huawei are technically ahead because they have had massive investment and also not inconsiderable successes globally due to their market position and pricing.

"However... if companies like Ericsson, Oracle, Nokia, or other new players see there is a market, then the gap can be quickly closed. Although, it may take financial stimulus from the government to get deployments running at the speed that is necessary."

Huawei announced in February that it has been awarded 91 commercial 5G contracts and has shipped out more than 600,000 5G Active Antenna Units (AAUs).

The firm claims to be "12 to 18 months ahead of the competition" and says it holds 20 pervent of all 5G patents—more than any other network vendor in the world.

The same month, Swedish officials announced the country would not issue a unilateral ban on Huawei, but stressed that its tech would face independent security reviews.