Ericsson expects Q2 or losses of more than US$100 million due to high initial costs for 5G business in China

Swedish telecoms giant Ericsson said on Monday it had lost more than 1 billion Swedish kronor ($109 million) in the second quarter as a result of writedowns on assets linked to its Chinese business,media reported. “Overall, Ericsson’s 5G business in China is expected to be healthy for the duration of the contract,” Ericsson said in a statement. However, the profit margin is expected to be negative in the second quarter of 2020 due to the higher initial cost of the new product. “

Ericsson expects Q2 or losses of more than US$100 million due to high initial costs for 5G business in China

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Ericsson also said the spending was an important part of its overall strategy to expand its business in key 5G markets. The announcement came as the company also said it had reached a cooperation agreement with three major Chinese operators.

Analysts estimate that Ericsson’s revenue will increase by 3-4% this year as 5G technology becomes more global. The company continues to adhere to its 2020 and 2022 financial targets.

Ericsson said the writedowns were related to pre-market inventory of products for the Chinese market and that its network division would announce write-down costs in the second quarter.

“While 5G’s presence in China will continue to dilute the net margin of the network sector in the short term, it expects to make a positive contribution to gross margin and operating income from the second half of 2020 and to be profitable over time in line with business plans,” the company said. “

Ericsson expects Q2 or losses of more than US$100 million due to high initial costs for 5G business in China