Can Huawei topple Ericsson’s carrier revenue?

Huawei has to narrow the lead with its innovative product and solutions if it plans to topple Ericsson

huawei-centerRen Zhengfei, chief executive officer of Huawei compares the company to a big tortoise. So, the big question is will Huawei (the tortoise) overtake Ericsson (the Hare) in terms of carrier revenue?

In 2013, Huawei’s carrier revenue is $27.5 billion and the growth in carrier network business is 4 percent whereas its total revenue  inclusive of carrier network, enterprise and consumer is $39.5 billion.

On the other hand, Ericsson’s total carrier revenue is SEK 227,376 billion i.e. $34.9 billion as the company has divested both its handset as well as enterprise division. The growth in carrier network business is almost flat in the last two years.Ericsson has formidable lead of $12 billion in the carrier network.

So, the big question is will Huawei overtake Ericsson’s carrier revenue and by when?

This is a big lead and it would not be easy for Huawei unless they take some strategic steps to capture mobile broadband which is planned to grow around 9 billion by the end of 2018, fixed broadband which is estimated to grow from around 650 million by the end of 2013 to around 800 million in 2018 and mobile data traffic volume which is estimated to increase by around seven times in the period 2013-18. All this would not be easy but the company is taking the right steps.

Ericsson also leads in global services by a huge margin as it has a first mover advantage and is also well known with top telcos of the world. Here, it would be difficult for Huawei to make a dent but the company is actively pursuing this strategy.

In the past 25 years, Huawei has build a good platform and accumulated some resources and now the company has to take a lead by spoting a strategic opportunity by catching up quickly. At Huawei, the company has a base of 150,000 people and these people need to win in the ultra broadband age if they plan to overtake Ericsson in revenue.

Ren Zhengfei, chief executive officer of Huawei said, “Our company moves forward on two wheels – technology innovation based on customer needs and scientific exploration into the longer future. Huawei must have the courage to embrace disruptive innovations through self-reinvention and self-criticism. While fully tapping into the value of our installed business, we should not be pushing away disruptive innovations in the fear they might smash our golden bowl.”

Ericsson and Huawei: A Comparison

People
Ericsson has more than 114,000 people serving customers in over 180 countries
Huawei has more than 150,000 people serving customers in over 170 countries

LTE
Around 50 percent of all global LTE smartphone traffic goes through networks delivered by Ericsson
Huawei claims to be leader in commercial LTE deployment. Deployed 110 LTE networks in more than 100 capital cities

Global Services
Ericsson global services revenue in 2013 was $15 billion
Huawei global services revenue  in 2013 was $8.6 bilion, carrier software and core network was $2.8 billion

R&D
Focusing on carrier network, Ericsson has more than 35,000 granted payments and has one of the strongest portfolio
Huawei has 16 R&D centers and employs 45 percent of its workforce i.e. 70,000 employees.  Focusing on carrier, enterprise and consumer, the company has applied for 44,168 patents of which 36,511 have been granted

Geography
Ericsson has a strong installed base in European, North American, Latin American, Middle East and Indian market
Huawei has a strong base in China and is increasing its presence in European market

Acquisitions
In 2013, Ericsson has acquired Airvana (supplier of EV-DO software), Mediaroom (platform for video distribution), Telcocell (consulting and SI company specializing in BSS), Modems (design, development, sales of LTE multi-mode thin modem solutions) In 2013, Huawei’s acquisition strategy is not known

Source: TeleAnalysis

In 2014, the global economy will continue to recover and ultra broadband and mobile broadband will be the key for new investments in telecom. It would be interesting to see how both these companies shape up with respect to mobile broadband, cloud computing, big data analytics, internet of things (IoT) and social networking leading to integration of digital and physical world.

The future will be software and Ericsson has an enhanced portfolio of support solutions where the focus is on OSS/BSS, TV and media management and m-commerce. Presently, Ericsson has a lead vis-a-vis Huawei. Focus would be also on how both the companies improve efficiency and productivity thereby increasing their profitability which will be used for R&D investments to come out with innovative solutions.

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