23rd Sep 2021
5G is seen as the technology of the future, powering everything from self-driving cars and robotic industrial machinery to hyper-fast gaming experiences and remote personal health monitoring. The competition is fierce, but thanks to a combination of cutting-edge tech and global political concerns, Ericsson is carving out its place as a major player.
5G is the future of tech
5G, or the fifth generation wireless standard, brings faster network connectivity which makes it possible to run and access remotely advanced technologies in the cloud. By reducing latency and increasing the speed of data-heavy communications like high-definition video, 5G supports new use cases for applications like virtual reality (VR) and augmented reality (AR); communication between internet of things (IoT) and industrial IoT (IIoT) sensors in heavy machinery, self-driving cars, Unmanned Aerial Vehicles (UAVs) and drones, and wearable and implanted medical devices; edge computing; and more. The impact of 5G’s transformative potential has even been characterized as a fourth industrial revolution.1
Tech companies are still in the process of developing new applications that take full advantage of the potential 5G represents. As well as leading the field in 5G network provision, Ericsson is also investing heavily in developing ways to improve 5G network connectivity and coverage, encouraging businesses to take advantage of the benefits of 5G, and researching new 5G applications and services.
5G coverage is sweeping the globe
Ericsson’s confidence in the future seems to be vindicated by the speed with which 5G is rolling out around the world; approximately 2 years faster than the timing for 4G LTE. Ericsson attributes that partly to the earlier availability and affordability of 5G devices, and partly to the enthusiastic take-up demonstrated by China. According to its own original research, 5G mobile subscriptions are increasing at a rate of approximately 1 million per day, worldwide. Global 5G subscriptions are predicted to rise from 220 million in 2020 to 580 million, or more than double the number, by the end of 2021 and to cross the 3.5 billion mark by 2026, by which point 60% of the world’s population is expected to be using 5G.2
It’s clear that COVID-19 did little to hold back 5G adoption, as pointed out by Patrik Cerwall, head of strategic marketing insights at Ericsson. “5G of course is happening … despite the pandemic and what you could have expected over more of a slower technology evolution,” said Cerwall. “It’s actually the opposite. I think everyone sees the need for technology.”3
Ericsson’s partnerships are rapidly multiplying
It’s not just 5G in general which is sweeping the globe; Ericsson is one of the main beneficiaries of this change. In the last few months, the company has signed an astonishing number of deals with telecommunications carriers around the world to enable reliable, strong 5G coverage for consumers, businesses, industry, and government services.
Vodafone is using its partnership with Ericsson to roll out 5G Standalone (SA) networks in Germany and the UK, making these the first countries to use 5G networks that operate without the “safety net” of 4G (LTE) connectivity on a large scale. While all 5G networks lower latency and increase connection speeds, standalone 5G brings even more noticeable results, as well as decreasing energy consumption by mobile phones4and allowing more devices to connect to the same mobile data network simultaneously. The new standalone networks will support more advanced use cases that need the fastest speeds and lowest latency. 5
Ericsson similarly extended its partnership with Switzerland’s leading telecommunications carrier Swisscom, which supplies 5G to 96% of the country’s users. After working together to establish Europe’s first commercial 5G network in 2019, Swisscom will now be taking advantage of Ericsson’s full 5G portfolio to improve its customer experience and prepare to transition to 5G standalone mode. 6
It’s not just Europe. Chile’s largest telco company, Entel, also struck a deal to bring 5G to the country. With the help of Ericsson, Entel will be able to provide high speed connectivity even to its remotest areas such as Easter Island, while offering its business and commercial customers the support they need for advanced AR, VR, and IoT use cases7. On the other side of the world, Ericsson won a tender to be the sole provider of 5G network services in Malaysia8; signed a deal with Emirati carrier Etisalat to provide 5G millimeter wave (mmWave) connections for its commercial 5G network in the UAE9; and was selected to partner 2degrees, a communications service provider in New Zealand. 10
Although all these deals share the common goal of extending 5G coverage for network users, Ericsson’s partners have a wide range of use cases in mind. Some countries, like the UAE, have already advanced a long way along the road of 5G, and are looking to Ericsson for cutting edge Fixed Wireless Access (FWA) that delivers fiber-internet-like wireless speeds for huge crowds of users at hotspots like malls, stadiums, and large indoors events11. Others, like 2degrees in New Zealand, are just beginning to upgrade their networks and want to extend their wireless broadband coverage to more areas and users12. Part of what makes Ericsson potentially one of the best 5G stocks is that it’s able to deliver such a range of 5G services.
Adding to its triumph, Ericsson has been recognized as a leading 5G network provider by two independent consulting firms. Frost & Sullivan named Ericsson as a market leader in global 5G network infrastructure in 202013, and Gartner termed it a Leader in its 2021 Magic Quadrant for 5G Network Infrastructure for Communications Service Providers14. The company has more than 130 commercial 5G agreements with separate telco providers worldwide15.
In the head to head with Huawei, Ericsson is edging into the lead
But the main achievement, for Ericsson, is probably beginning to take over market share from its primary competitor Huawei16. In 2021 alone, Ericsson edged out Huawei to win the tender in Malaysia17; was chosen by Telefonica Spain to run its standalone 5G network even though Huawei was part of the consortium running the existing 4G network18; and is one of the vendors permitted to work with Indian telcos, while Huawei has been excluded19.
Huawei executives, as well as the Chinese Communist Party, complain that global politics are affecting business decisions. Sweden banned Huawei as a vendor for security reasons, and Belgium and Spain have made similar decisions20. China has warned Ericsson that these considerations could rebound to harm the company, making not-so-veiled threats to put Ericsson out of the running for lucrative Chinese connectivity contracts. “If Sweden bans Huawei citing so-called national security grounds, China can do the same to Swedish companies,” warned Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, writing in the CCP-controlled Global Times21.
It’s true that China is a major market for Ericsson, where it has a market share of around 12%22, but the new deals it picks up elsewhere around the world could quickly make up for the loss of that market. China’s relative importance in the global 5G market could also decline soon, as other countries catch up with its 5G maturity and increase their value as customers. Huawei is also starting to feel the bite of US sanctions, which are cutting off the chips needed for 5G radio equipment. If it’s forced to fall back on lower-quality components, that will have a knock-on effect on its competitiveness and further boost Ericsson’s in comparison23.
Ericsson’s success is 5G’s success
Ericsson itself is working to speed up adoption of various 5G capabilities around the world, running a number of projects and trials to develop new applications, discover new cases, and innovate more powerful ways to connect. For example, Ericsson is working together with Google Cloud at Ericsson’s Silicon Valley D-15 Labs, combining Google Cloud’s compute platform with Ericsson’s 5G portfolio to assist industries that use edge computing, such as finance, entertainment, retail, and healthcare, to develop and roll out more digital experiences for their customers24. In April, Ericsson launched its own Open Lab in Ottawa, Canada. The Open Lab is a space for 5G customers and service providers to experiment with new 5G Radio Access Network (RAN) technologies to create new use cases and increase automation. It operates with tech from a range of 5G service providers as well as Ericsson25.
Other Ericsson pilots include the Hyperbat factory in the UK, which will be the first manufacturing plant using digital twin technology to allow engineers in different locations to collaborate on design and build. The 3-D digital twin technology relies on 5G for high definition, low latency, and high speed data handling to ensure that all the workers are constantly updated with the model changes in real time26. In May, Ericsson worked with Volvo Cars on the first successful handover of self-driving vehicles from one mobile network to another, again relying on Ericsson’s 5G capabilities to ensure that the vehicle always had accurate maps to guide it’s direction and positioning on the road27. Ericsson also worked together with USCellular and Qualcomm to extend the range of a 5G wireless link over FWA network without any loss of strength, an important milestone for proving ongoing 5G development28. In June, a joint project with Deutsche Telekom and Samsung trialled the first 5G end to end network slicing for VR gaming, allowing service providers to offer differentiated services to different users on the same network29.
For investors, Ericsson’s appeal continues to shine
The company’s Q1 revenue announcement showed that network sales grew by 15% organically year on year, despite a decline in Intellectual Property Rights licensing revenues30. The company is valued by business customers who use 5G capabilities to advance their customer offering; telco partners who rely on Ericsson to extend their 5G coverage; and consumer users who appreciate fast cloud gaming, AR apps, and HD streaming to their mobile devices.
Investors who want to be part of the cutting-edge possibilities of 5G are paying attention to Ericsson’s achievements, but may be reluctant to put all their eggs into one 5G stock basket. One way to mitigate some exposure to risk and spread their investment would be to invest in a 5G ETF like Defiance’s FIVG, which includes top 5G stocks like Ericsson and other leading 5G holdings. FIVG tracks the BlueStar 5G Communications Index, a rules-based index that tracks the performance of US-listed stocks involved in all areas of the 5G rollout out. For an investor unsure about which specific 5G stocks to buy, it offers exposure to a range of 5G companies stocks.
1 “5G & The Fourth Industrial Revolution,” Mark Newman, Jan 14, 2020. https://uk5g.org/5g-updates/read-articles/5g-fourth-industrial-revolution/
2 “Ericsson Mobility Report: More than half a billion 5G subscriptions by the end of 2021” June 16, 2021 https://www.ericsson.com/en/press-releases/2021/6/ericsson-mobility-report-more-than-half-a-billion-5g-subscriptions-by-the-end-of-2021
3 “Over half a billion people will use 5G this year, Ericsson predicts” June 15, 2021 https://www.cnet.com/news/over-half-a-billion-people-will-use-5g-this-year-ericsson-predicts/
4 “Vodafone partners with Ericsson to deploy Europe’s largest commercial 5G Standalone network” April 12, 2021 https://www.ericsson.com/en/news/3/2021/vodafone-partners-with-ericsson-for-europes-largest-commercial-5g-standalone-network
5 “Vodafone strengthens European partnership with Ericsson through new 5G Core contracts” June 17, 2021 https://www.ericsson.com/en/news/2021/6/vodafone-strengthens-european-partnership-with-ericsson
6 “Ericsson and Swisscom strategic partnership extension to include 5G Standalone” May 3, 2021 https://www.ericsson.com/en/news/2021/5/swisscom-5g-standalone
7 “Ericsson signs a 5G and IoT agreement in Chile” July 5, 2021 https://developingtelecoms.com/telecom-technology/wireless-networks/11449-ericsson-signs-a-5g-and-iot-agreement-in-chile.html
8 “Ericsson comes out top in Malaysia’s 5G tender race; to launch in 3 states” July 5, 2021 https://techwireasia.com/2021/07/ericsson-wins-malaysias-5g-tender-race-to-launch-in-3-states-by-end-2021/
9 “Etisalat and Ericsson partner to commercially deploy 5G high-band in the UAE” June 20, 2021 https://www.ericsson.com/en/news/5/2021/etisalat-and-ericsson-partner-to-commercially-deploy-5g-high-band-in-the-uae-
10 “New Zealand’s 2degrees selects Ericsson as sole 5G RAN partner” April 14, 2021 https://www.ericsson.com/en/news/2021/4/2degrees-new-zealand-opts-for-ericsson-5g
11 “Etisalat and Ericsson partner to commercially deploy 5G high-band in the UAE” June 20, 2021 https://www.ericsson.com/en/news/5/2021/etisalat-and-ericsson-partner-to-commercially-deploy-5g-high-band-in-the-uae-
12 “New Zealand’s 2degrees selects Ericsson as sole 5G RAN partner” April 14, 2021 https://www.ericsson.com/en/news/2021/4/2degrees-new-zealand-opts-for-ericsson-5g
13 “Ericsson positioned as the leader in Frost Radar™: Global 5G Network Infrastructure Market, 2020” April 7, 2021 https://www.ericsson.com/en/news/2021/4/ericsson-top-ranking-on-5g-frost-radar
14 “Ericsson named a Leader in the 2021 Gartner Magic Quadrant for 5G Network Infrastructure for Communications Service Providers report” February 23, 2021 https://www.ericsson.com/en/press-releases/2021/2/ericsson-named-a-leader-in-the-2021-gartner-magic-quadrant-for-5g-network-infrastructure-for-communications-service-providers-report
15 “Ericsson positioned as the leader in Frost Radar™: Global 5G Network Infrastructure Market, 2020” April 7, 2021 https://www.ericsson.com/en/news/2021/4/ericsson-top-ranking-on-5g-frost-radar
16 “Huawei continues to lose share of booming global telecoms equipment market” June 16, 2021 https://telecoms.com/510187/huawei-continues-to-lose-share-of-booming-global-telecoms-equipment-market/
17 “Malaysia picks Ericsson over Huawei to build 5G network” July 1, 2021 https://asia.nikkei.com/Spotlight/5G-networks/Malaysia-picks-Ericsson-over-Huawei-to-build-5G-network
18 “Telefonica Spain snubs Huawei in favour of Nokia, Ericsson for SA 5G” June 15, 2021 https://www.totaltele.com/509957/Telefonica-Spain-snubs-Huawei-in-favour-of-Nokia-Ericsson-for-SA-5G
19 “Huawei and ZTE miss out on Indian 5G trials” June 15, 2021 https://www.totaltele.com/509540/Huawei-and-ZTE-miss-out-on-Indian-5G-trials
20 “Ericsson fears China losses as a result of Sweden–Huawei row” May 24, 2021 https://www.totaltele.com/509738/Ericsson-fears-China-losses-as-a-result-of-SwedenHuawei-row
21 “Swedish court ruling on Huawei ‘politicized’, placing Ericsson in peril: analyst” June 23, 2021 https://www.globaltimes.cn/page/202106/1226867.shtml
22 “Ericsson fears China losses as a result of Sweden–Huawei row” May 24, 2021 https://www.totaltele.com/509738/Ericsson-fears-China-losses-as-a-result-of-SwedenHuawei-row
23 “Ericsson is back to boringly good, but China threats loom” April 21, 2021 https://www.lightreading.com/5g/ericsson-is-back-to-boringly-good-but-china-threats-loom/d/d-id/768917
24 “Google Cloud and Ericsson Partner to Deliver 5G and Edge Cloud Solutions for Telecommunications Companies and Enterprises” June 29, 2021 https://www.ericsson.com/en/press-releases/2021/6/google-cloud-and-ericsson-partner-to-deliver-5g-and-edge-cloud-solutions-for-telecommunications-companies-and-enterprises
25 “New Ericsson Open Lab to drive network virtualization technologies” March 31, 2021 https://www.ericsson.com/en/press-releases/2021/3/new-ericsson-open-lab-to-drive-network-virtualization-technologies
26“Ericsson fuels UK automotive company’s Industry 4.0 drive with 5G VR” April 12, 2021 https://www.ericsson.com/en/news/2021/4/ericssons-vr-digital-twin-connectivity-for-hyperbat
27 “Volvo Cars and Ericsson achieve first cross-border 5G network vehicular handover” May 20, 2021 https://www.ericsson.com/en/news/2021/5/volvo-cars-and-ericsson-in-connected-car-milestone
28 “UScellular, Qualcomm, Ericsson, and Inseego Address Digital Divide with Multi-Gigabit Extended-Range 5G Milestone Over mmWave” May 6, 2021 https://www.ericsson.com/en/press-releases/6/2021/5/uscellular-qualcomm-ericsson-and-inseego-address-digital-divide-with-multi-gigabit-extended-range-5g-milestone-over-mmwave
29 “Ericsson in world-first 5G network slicing trial with Deutsche Telekom and Samsung” June 30, 2021 https://www.ericsson.com/en/news/3/2021/ericsson-in-world-first-5g-network-slicing-trial-with-deutsche-telekom-and-samsung
30 “Ericsson reports first quarter results 2021” April 21, 2021 https://www.ericsson.com/en/press-releases/2021/4/ericsson-reports-first-quarter-results-2021