Ericsson says China business to have healthy profitability; writes-down assets

NEW DELHI: Telecom gear maker Ericsson Monday said its 5G business in China is expected to have healthy profitability over the life of the 5G contracts it has secured from all three telcos.
The telecom gear maker has already strengthened its market share in China by winning 5G contracts with all the three Chinese network operators.
However, its margins during the second quarter of 2020 are expected to be negative due to the high initial costs involved in the product introduction.
Ericsson in its Q1 2020 earnings report had said its increasing share of 5G contracts would weigh negatively on its profitability in the second quarter of 2020, primarily driven by temporary negative gross margin in China.
In addition to the dip in profitability, Ericsson said the second quarter would be impacted by a cost of SEK 1 b. related to asset write-downs of pre-commercial product inventory for the Chinese market. Ericsson added its gross margin will be impacted as the cost will be reported in the segment networks.