The ban on Huawei helped revive Ericsson, but landed CEO in a tough spot10 min read . Updated: 01 Apr 2021, 02:23 PM IST
- Börje Ekholm felt moved to lobby for Chinese rival to protect his global business against a backlash from Beijing
Few companies have gained more from the U.S.-led campaign against China’s Huawei Technologies Co. than Ericsson AB. The Swedish business, in a tailspin a few years ago, now surpasses Huawei in selling cellular equipment in much of the world.
Yet over the past few months, Ericsson Chief Executive Börje Ekholm has gone on a lobbying campaign—on Huawei’s behalf.
Mr. Ekholm met Swedish politicians to protest the way the country barred Huawei equipment from the country’s 5G networks over national-security concerns. He complained to journalists in Europe and China. He sought law firms to help Huawei fight the ban.
Mr. Ekholm says that in an increasingly intertwined world he is just looking after his company’s interests. After the Swedish 5G ban, Beijing threatened to retaliate against Ericsson’s business in China, where it runs a major factory and gets 8% of its sales, versus 1% from Sweden.
“We depend on free trade," Mr. Ekholm said in an interview. “It’s about having access to markets, and that is at the center of what we are."
The Swedish ban may have boomeranged in other ways as well. Several Chinese state-controlled media outlets suggested there could be consequences for the Wallenbergs, a family known as the Rockefellers of Sweden. Their investment company is a major shareholder in Ericsson and several other European giants, and the largest single owner of stocks traded on Sweden’s exchange.
Europe has emerged as a battleground in the new technological Cold War between the U.S. and China. European capitals increasingly side with Washington. Some of the continent’s biggest companies are defending Beijing. The new Biden administration is signaling its own China hawkishness, providing executives little hope of a sudden detente.
European business leaders hold up Australia as Exhibit A on the drawbacks of bad relations with Beijing. After the Australian government banned Huawei 5G equipment and then called for an investigation of Beijing’s handling of the pandemic last year, the Chinese government restricted imports of Australian wine, beef and other goods.
Last week, Chinese mapping and e-commerce apps removed all mention of Swedish fashion giant H&M Hennes and Mauritz AB, essentially erasing it from some of China’s most popular online services. That coincided with a social-media frenzy over the company’s decision to stop sourcing cotton from a region in China accused of using forced labor.
In the U.K., a ban against Huawei gear triggered protests from executives. Vodafone Group PLC said removing Huawei gear already in its networks would cost billions. Sherard Cowper-Coles, chairman of the China-Britain Business Council, which represents about 500 British organizations that have commercial relations with China, including BP PLC, Jaguar Land Rover and several universities, said his group is pressing the British government to maintain commercial engagement.
“If we’re going to export to countries other than the Netherlands and Sweden and Denmark, and possibly New Zealand and Australia and Canada, we are going to be operating in countries where the human rights- or other situation is less than ideal," Mr. Cowper-Coles said in a conference call.
U.S. companies, too, have come to China’s defense at times when Washington’s China policy threatens business. Qualcomm Inc. and Microsoft Corp. have both criticized the Trump administration’s restrictions on partnering with Chinese companies.
Few European businesses are more ensnared in the U.S.-China standoff than Ericsson. U.S. leaders are trying to bolster both it and Finnish counterpart Nokia Corp. They are offering loans to developing countries to buy their equipment, while a former official in the Trump administration even floated the idea of the U.S. government buying stakes in them. Lacking its own industry player, Washington prefers the world’s phone and internet data to run through equipment made by these Nordic companies rather than Huawei.
Ericsson is now walking a tightrope—trying to position itself to benefit from the Western backlash against Huawei while also protecting its sales and manufacturing in China.
The company has deep roots there. Started as a Stockholm telegraph-repair shop in 1876, it was selling wooden phones in China in the 1890s.
When Ericsson hit financial turbulence in the 1930s, the company became the target of the Wallenbergs, a Swedish banking and industrial family known for scooping up assets in hard times. The family name became associated with heroism when one member, Swedish diplomat Raoul Wallenberg, safeguarded 20,000 Jews in Hungary during World War II.
By 2000, Ericsson was the world’s leading supplier of 3G equipment and a cellphone leader.
Its next two decades were rockier. Alongside Western rivals Motorola and Nortel, Ericsson started losing telecom-equipment sales to Huawei and China’s ZTE Corp. Both Chinese companies were selling competitive products at lower prices, sparking a consolidation that reduced the industry to four big players by 2016: Huawei, ZTE, Nokia and Ericsson.
In 2016, Ericsson asked one of its board members, Mr. Ekholm, an electrical engineer by training, to overhaul the company. He said no.
After a decade running Investor AB, the Wallenbergs’ investment vehicle and Ericsson’s biggest shareholder, Mr. Ekholm felt settled in early retirement with his family near Vail, Colo. The Swedish-born naturalized American was skiing, fishing and serving on the board of Alibaba Group Holding Ltd., which he joined at the request of Joe Tsai, a former Investor executive who co-founded the Chinese e-commerce giant with Jack Ma.
Mr. Ekholm, now 58 years old, said he relented when Ericsson said he could stay in the U.S. He wakes at 4 a.m. to accommodate the time zone difference and shuttles among homes in Colorado, Connecticut and Sweden. A passionate NFL fan, he attended four straight Super Bowls starting in 2017. He missed the end of that year’s game, when Tom Brady and the Patriots overcame a 28-3 lead by the Falcons, to catch a flight to China.
Months into his new job, Mr. Ekholm concluded Ericsson had spread itself too thin and should focus on its core business of making cellular equipment. He sold businesses and cut employees, but added thousands of R&D jobs to help Ericsson better compete in sectors where he felt Huawei was ahead.
Geopolitics started playing an outsize role in corporate strategy around 2018, Mr. Ekholm says. The Trump administration accused Huawei of being a national security threat, capable of allowing Beijing to use its networks and employees to spy around the world. Huawei says it is a private company and isn’t beholden to Beijing.
Washington began serious efforts to persuade allied countries to ban Huawei and to cripple the Chinese company’s supply chain. U.S. officials viewed 5G as a transformational technology that could enable commercial and military innovations such as driverless vehicles, robot-run factories and internet-connected everyday objects, such as heart monitors and sneakers. They worried about the prospect of Chinese-backed hackers spying on or sabotaging 5G-connected devices.
The White House began mulling banning 5G equipment manufactured in China from being used in the U.S., even if the equipment came from a Western company.
Ericsson has 13,000 employees and a major manufacturing plant in China, which makes cellular equipment for China and markets in Asia and Africa. Mr. Ekholm said he responded by making Ericsson’s supply chain more flexible. The company opened its first U.S.-based 5G-equipment factory, outside Dallas, last year.
Meanwhile, U.S. pressure on Huawei was starting to boost Ericsson’s business. Ericsson in January reported one of its best financial years in the past decade, saying it increased share in all its markets, including those without any restrictions against Huawei.
Huawei was still the world’s top cellular-equipment maker by market share in 2020, according to research-firm Dell’Oro Group. The firm said Ericsson was No. 1 when the Chinese market was excluded, with about a 35% share of revenue, and is gaining ground on Huawei.
In Sweden early last year, citizens were hardening their views on China, after bookseller Gui Minhai, who was born in China and held Swedish citizenship, was sentenced to 10 years in prison on espionage charges. Mr. Gui’s daughter has described him as a victim of political persecution.
Mr. Ekholm had expected Sweden to adopt European Union cybersecurity recommendations that would effectively ban Huawei equipment from Swedish 5G networks, but without naming Huawei or China. Countries including France, Poland and the Czech Republic had already adopted similar tactics, which would make it harder for China to retaliate.
In October, Sweden’s telecom regulator went a step further and singled out Huawei and ZTE. “The millisecond I got the press release, I realized this was not good," Mr. Ekholm says.
The next day, a spokesman for China’s foreign ministry said Sweden should “correct its mistake and avoid negative impact on China-Sweden economic cooperation and the Swedish businesses operating in China." China’s ambassador to Sweden said Ericsson could face consequences, while at least three Chinese state-controlled media outlets suggested, without evidence, that the Wallenbergs pushed the Swedish government to ban Huawei.
Their articles pointed out that the Wallenbergs had major shares in several businesses that do big business in China, including Swiss industrial giant ABB, Swedish home-appliance maker Electrolux AB and British-Swedish pharmaceuticals maker AstraZeneca PLC. Some writers suggested that some of the Wallenbergs’ major holdings should face consequences if Sweden didn’t reverse the Huawei ban.
Jacob Wallenberg, the chairman of Investor AB, told a Swedish newspaper that “stopping Huawei is definitely not good." An Investor spokeswoman declined to comment on the Chinese media’s reports. She said China is the second- or third-largest market for many of Investor’s holdings, and that the company supported Mr. Ekholm’s leadership at Ericsson.
Mr. Ekholm said he responded to the Sweden Huawei ban and Beijing’s threats on behalf of only Ericsson, not the Wallenbergs. In interviews with journalists in both Europe and China, he called the Swedish ban of Huawei and ZTE unfair. Visiting Sweden at the time, Mr. Ekholm also scheduled a meeting with lawmakers to criticize what he considered a ham-fisted handling of the Huawei decision.
From late October to early December, Mr. Ekholm sent Sweden’s foreign-trade minister, Anna Hallberg, a series of messages. He texted her a link to a news article with the headline: “China’s ambassador: We might punish Ericsson." He noted how Sweden handled the situation differently than other countries: “The decision the government has supported singles out our Chinese competitors in a way no other EU country has done," he wrote.
At another point he asked: “Shouldn’t you talk to PTS?" referring to the independent telecom regulator by its initials.
“I really am trying to do what I can, Börje," Ms. Halberg wrote back. In a written statement, she said she took no measures to influence the regulator’s decision and that Sweden is working to strengthen economic ties with China.
Huawei asked Mr. Ekholm to help find legal counsel in Sweden, according to a person familiar with the matter, but Mr. Ekholm said in a text to Ms. Hallberg that he couldn’t find a lawyer to take up the cause. “There are plenty of cowards unfortunately," he wrote.
The text messages became public after a records request by Swedish newspaper Dagens Nyheter. “The SMSes were merely a way to document what had happened," Mr. Ekholm now says. “I didn’t want [Swedish politicians] to come back to me and tell me, ‘You never said anything.’ "
Some Ericsson employees, meanwhile, felt their CEO crossed a line by actively helping a rival, according to a person familiar with the matter, especially considering China’s own restrictions on foreign businesses. All but about 10% of the Chinese telecom-equipment market is controlled by Chinese players, largely Huawei.
Mr. Ekholm said he expects and respects different opinions from a company with 100,000 employees.
Mr. Ekholm says that while Chinese sales are important to Ericsson, he was primarily concerned about the less-visible effects of being shut out of the country, where 5G rollout has outpaced the U.S. and Europe. By being on the ground, learning how 5G works in the field, “we get to be at the forefront," Mr. Ekholm says.
He says he has been surprised that politics has become part of his daily life. “I didn’t think about this at all when I took this job," he says. “We find ourselves in an epicenter of activity, geopolitically, which I think was certainly not the main reason I signed up and have no real background in."
This story has been published from a wire agency feed without modifications to the text.