Ericsson in China

Under its 2000 Plan, Ericsson ordered RMB 14.9 billion worth of components from local suppliers in 2000, which experts felt, was a substantial order. Ericsson's determination to take root in China was expected to enable Chinese enterprises to land even more generous orders and have a larger share in the Sweden-based company's production and R & D activities. Apart from the staggering 4-time increase in domestic purchase value (from RMB 3.9 billion in 1999 to RMB 14.9 billion in 2000), Ericsson's accumulative investment in China reached $600 million by year-end 2000. Industry experts commented that the increase in domestic purchase improved the "homemade" rate of Ericsson (China) products. Two of the company's mobile phone models -- T18 and A1018 -- got more than 60% of their components from domestic suppliers.

The company suffered setbacks in 2001-02. Craig Watts, an analyst with Norson Telecom Consulting in Beijing, said, "I don't think there has been a worse time for Ericsson in the China market. We have just seen an erosion. The domestic makers are on their heels and are a lot cheaper. Ericsson is still winning contracts -- it just got a $150 million deal from China Unicom, for instance -- but the competition is much stiffer." The most obvious problem was the collapse of Ericsson's handset market share. In the mid to late 1990s, Ericsson controlled the mobile handset market in China along with Motorola and Nokia. But, by the early 2000s, the company was barely visible. At the end of 2001, Ericsson China controlled only 5% of the market, which further dropped to around 2% by mid-2002...