Swedish telecommunications company Ericsson has confirmed it will stop operating its hub in Nanjing and sell its research and product development there to TietoEVRY.
Swedish telecommunications group Ericsson will shut down one of its five research centers in China and transfer 630 employees to a partner, two sources said. The company is rapidly losing its share in the 5G market in China to domestic rivals like Huawei.
An unnamed source said that employees at the center in Nanjing, established in 2001, received an offer to work for TietoEVRY, a software company with offices in China.
TietoEVRY has agreed to pay equal wages to employees affected by the decision, according to the source. Employees who decline the offer will be entitled to a severance package.
A second source said that Ericsson’s 5G factory in Nanjing – a project meant to demonstrate its 5G capabilities – would not be affected.
In an email to the South China Morning Post on September 9, Ericsson confirmed it would sell its research and development operations in Nanjing to TietoEVRY, effective November 1, 2021. All affected employees will receive job offers from TietoEVRY, according to the email above.
The closure of the research center in Nanjing means that Ericsson has four other major research centers in Beijing, Shanghai, Guangzhou, and Chengdu. According to information from the company, the five centers have more than 5,000 employees and research and development spending amounting to 3 billion yuan ($464 million).
Ericsson President and CEO Borje Ekholm have said that the company will not give up the Chinese market easily.
Ericsson, once a major supplier of telecommunications equipment in China, said in July its profit in the second quarter of 2021 in China fell 60 percent year-on-year.
Ericsson has previously warned that the company’s business in China could be threatened by geopolitical tensions if Swedish authorities decide to ban Huawei from supplying equipment for Sweden’s 5G network infrastructure. . Ericsson itself has been lobbying for months against the ban.
In July, Ericsson said it would no longer count on 5G bids in China that it had previously hoped to win, according to Reuters.
In another development signaling that foreign telecommunications equipment companies are losing market share in China to domestic rivals, Ericsson and Nokia have won only a fraction of the construction contracts. 700 megahertz 5G network base stations, ordered by China Mobile and China Broadcasting Network (CBN).
However, in an interview, earlier this month, Ericsson’s chairman and CEO told Reuters the company would not give up its business in China easily, where Ericsson has been present for 120 years.
China is the largest 5G market in the world, with nearly 1 million 5G base stations in operation in the first half of this year.