UK Gov carves out £1bn to save struggling firms

The UK Treasury has announced a new scheme which will see as much as £1 billion made available to UK SMEs who are struggling financially during the COVID-19 outbreak.

The news will certainly provide some relief for companies which might be placed under notable strain thanks to decreased cash flow in recent weeks, but there are some strings attached to the cash.

“Britain is a global leader when it comes to innovation,” said Chancellor of the Exchequer Rishi Sunak. “Our start-ups and businesses driving research and development are one of our great economic strengths and will help power our growth out of the coronavirus crisis.”

“This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”

The £1 billion will be broken into two pots, the first of which will be known as the Future Fund. This fund comprises of £250 million put forward by the Treasury for high-growth companies impacted by the crisis, with relevant companies able to apply for 36-month loans between £125,000 and £5 million.

To be eligible for these loans, companies would have to fit the following criteria:

  • Must be an unlisted UK registered company
  • Raised at least £250,000 from private parties in previous funding rounds within the last five years
  • Can match the Government loan with funds raised from the private sector

Although the Government is boasting of a ‘£500 million’ future fund, it is only providing the cash for half of this. The remaining £250 million will be provided by the private sector, and loans will be void if the applicant is not able to match the Government cash with private investment.

This condition does make it a bit more difficult for companies to apply for the funds, though at least the Treasury is dipping into the bank accounts to aid SMEs during this period. This is of course a segment which is under-threat.

The SMEs are an interesting segment of the economy, as while they are certainly big enough to cause disruption, when cash-flow is compromised, these are companies which potentially look very fragile. In some areas of the economy, this could have a significant impact to competition, as bigger corporations are much more secure thanks to bigger bank accounts, as well as investors and lending facilities to fall back on.

For example, as a multinational corporation with a very large corporate finance division, the Vodafone Group can access €13.6 billion in cash and other lending facilities during difficult periods (Annual Report – Page 51). Smaller companies would not have these facilities and/or security, while few (if any) organisations could have predicted there would be a crisis of this nature to prepare for.

Should these SMEs not be protected by the Government, there is a risk of bankruptcy or acquisitions. Both outcomes could dent the competitive landscape, or impact the UK’s ability to lead the way to the next digital economy.

The second pot of cash will be directed towards R&D firms who are likely to be burning through cash at a much faster pace.

“We are the tech and creative capital of Europe, and it’s crucial to maintain our place,” said Secretary of State for Digital, Culture, Media and Sport, Oliver Dowden. “This funding will protect high growth businesses and enable the unicorns of tomorrow to thrive so that tech is in pole position to drive our post COVID recovery.”

This £750 million fund will be carved into several different categories, but ultimately is aimed at supporting SMEs who work in the R&D world.

Starting with Innovate UK, the UK’s innovation agency, £200 million of grant and loan payments will be made immediately available for the 2,500 firms it counts as customers. An additional £550 million will soon be offered to the same firms, while this secondary pot will also provide £175,000 loans to the 1,200 (roughly) R&D firms not currently in receipt of Innovate UK funding.

“techUK welcomes the support being made available today by Government,” said Julian David, techUK CEO. “The businesses that will be supported by these schemes represent the innovative companies of tomorrow. techUK will continue to work with Government to clarify how the schemes will work in practice to ensure the broadest range of companies can benefit from this lifeline.”

The SME and start-up community has been calling for additional support from the UK Government for weeks and this is a good starting point. It will not be perfect, as some firms will slip through the bureaucratic cracks, but as this is an unprecedented crisis mistakes will be made. This is a positive step forward, however.

With 5G on the horizon, a new digital economy will emerge. 5G is much more than doing things faster than 4G, as it will give rise to new products and services which are not imaginable today. New companies and new fortunes will be created, but if a nation does not protect the start-up community and the innovators who are working on these ideas, the profits will of course be captured elsewhere.

Reliance Jio reckons it can do 5G without vendor help

Reliance Jio has thrown somewhat of a spanner in the 5G ecosystem, reportedly claiming it has developed its own ‘end-to-end’ 5G technologies.

According to The Economic Times, the disruptive telco is set to take its chaos to another segment of the industry; network infrastructure. Although trials are still taking place, the confident claims suggest the telco could become less reliant on the traditional ecosystem and could create more of a commodity-based supply chain.

“We are more scalable than these vendors and are fully automated since we have our own cloud-native platform,” one insider said. “In 5G, we will totally be self-sufficient. We can give the design, layouts and board support packages to third-party manufacturers to have our gear made.”

Such news will come as somewhat of a headache for some suppliers, most notably because of the potential profits Jio would have offered. India is of course a massive country which is aggressively driving towards digital after all. Jio has been trialling 5G technologies with most of the main players, while Samsung is currently the sole supplier of RAN equipment.

Speaking to Gabriel Brown of Heavy Reading, Jio is a telco which is very capable of making such an idea work, while there are numerous benefits from a commercial and operational perspective as it gains much greater control over its technology roadmap. The in-house designs would be built for the nuances of the Jio network and no-one else after all.

However, there are always risks.

“It remains to be seen what the right mix is,” said Brown. “Just because you can, doesn’t mean it’s the right thing to do.”

Bringing elements of the telco business in-house could be considered a positive move, but sometimes you have to have some humility. As Brown points out, the major vendors have close to ten years of 5G R&D under their belts and at least 5 years of actual technology and product development. Replicated this is such a short period of time, is not going to be a simple task.

James Crawshaw, another Heavy Reading analyst, was also slightly sceptical of the initiative.

“It is usually more efficient to buy than build,” said Crawshaw. “They are one operator, while vendors can spread R&D costs over many customers.”

Crawshaw suggests this could be somewhat of a difficult equation to balance. Some companies have a powerful engineering culture, encouraging employees to build rather than buy. This might be more cost effective (assuming the project works out) but detracts from focusing on what really will differentiate them, software and applications for example.

What this is demonstrative of is the evolving telco space.

“As networks become pieces of software, the market will be more open to challengers, including network operators themselves,” said Dario Talmesio of analyst firm Omdia.

With initiatives such as Facebook’s Telecom Infra Project (TIP) and technologies such as OpenRAN gaining more momentum, the telco industry is evolving very quickly. Hardware companies used to be the heavyweights, though this influence is becoming increasingly weakened as software specialists become more important.

Although the success of this project is still unknown, it does raise some very interesting questions. Could this further dilute the influence of industry heavyweights such as Ericsson, Nokia and Huawei? Might this accelerate the movement towards commodity-based hardware in the networks? Will Jio be able to source new revenues through a licensing unit? Might other telcos be encouraged to head down this route also?

R&D spend is increasing in UK, but still not at the top table

Figures from the Office of National Statistics (ONS) suggest investment towards R&D is heading the right direction, though there is still work to be done to compete with the worlds’ best.

Across all sectors in the UK, R&D spend by private companies increased by 5.8% to £25 billion. Drilling down into these figures, telecoms accounted for £947 million, a year-on-year increase of 25.4%, making it the fastest growing segment. This figure is still significantly down on the historical high of £1.5 billion spent in 2007, though growth is always an encouraging sign.

“The telecoms industry is extremely important to the UK strategically and it is reassuring to see such growth in investment,” said Mark Tighe, CEO of R&D tax relief firm Catax.

“There is still some way to go if this investment is to recover to levels seen before the financial crash, however, and it is vital this happens if Britain is to continue to be a key technological player on the world stage.”

Investment in R&D has become quite a point-of-interest to the UK Government, and measuring R&D investment as a percentage of Gross Domestic Product (GDP) is a key performance indicator of the Industrial Strategy. By 2027, the Government objective is for R&D to make up 2.4% of GDP, though this target also factors in public investment which the ONS figures do not.

In comparison to other nations which the UK aims to compete with the technology segments, the story is perhaps not as encouraging.

Country Percentage of GDP Total in USD ($) billions Researchers per million population
China 1.5 286.4 1096
Finland 2.1 4.9 7011
Germany 1.9 74.1 4318
Israel 3.5 11.6 8250
Japan 2.6 131.8 5328
Korea 3.7 57.2 6856
Sweden 2.1 9.5 6877
USA 1.9 340.7 4217
UK 1.2 33.3 3765

Statistics courtesy of UNESCO (latest available figures)

As may have been suspected, the bigger economies are contributing more cash to R&D efforts, though those who are creating more investment friendly landscapes are also thriving. Israel or Finland might not be spending the most, though the number of researchers is much more concentrated. This is clearly having a positive impact on innovation.

Looking at the comparative figures, the UK might claim to be prioritising R&D to ready the nation for the future, but the numbers do not necessarily support this. If R&D is an indicator of where profits and influence will lie in the future, other technology-orientated nations are in a better place.

What is also worth noting is the figures mentioned above are private investment, not including any expenditure from Government agencies on testbeds, as an example, or academic research. Certain governments have been more proactive when it comes to spending money on innovation in pursuit of glories in the digital world, and the UK is certainly one which has been quite vocal.

Although R&D investment is increasing, across the board the UK is not competing with those nations which would be considered the most innovative. What is worth noting is that the most successful countries are generally those where private industry investment makes up a considerable percentage of GDP, or the larger economies where investment in real terms is eye-wateringly high. Looking at these numbers, the UK falls into neither category.

Xiaomi goes Suomi for camera research

The Chinese smartphone maker Xiaomi has set up in Finland its largest R&D centre outside of China for imaging technologies.

Xiaomi announced today that it has opened an R&D centre in Tampere, west Finland, to focus on smartphone camera technologies, including camera algorithms, machine learning, signal processing, and image and video processing. This will be Xiaomi’s largest Camera R&D team outside of China, the company says.

“The setup of this R&D team in Finnish city Tampere is a milestone in our global expansion journey. In this journey, not only do we consolidate ourselves in operations and business, but also work with local talents to further improve our products with highly innovative technologies,” said Wang Xiang, Senior Vice President of Xiaomi, adding that “this move all the more highlights our longstanding commitment of ‘innovation for everyone’.”

First reported by the website Suomimobiili.fi, Xiaomi’s local business entity, Xiaomi Finland Oy, was incorporated in May, and has rented an office space for around two-dozen employees at the Hermia Technology Park (Hermia-teknologiapuisto), not far from the University of Tampere’s technology campus, which is rated as one of the leading facilities in imaging related research.

Tampere used to be a key R&D centre for Nokia, giving the Finnish phone maker the leadership in camera phones. As Xiaomi’s press releases acknowledged, Tampere “has been greatly contributing to camera and imaging related innovations of leading smartphone brands since the 1990s.” That legacy is not lost. According to an earlier report by the local newspaper, Aamulehit, Nokia entered into a significant patent licensing agreement with Xiaomi two years ago.

Jarno Nikkanen, one of Xiaomi’s first Finnish employees and the Head of Xiaomi Finland R&D, was a Nokia veteran, with a PhD in signal processing from the Tampere University of Technology (now merged with the University of Tampere). He started his current role in June, according to his LinkedIn profile. “Xiaomi’s philosophy has been innovative and highly engaging. It’s all about empowering the teams and individuals to find solutions on their own. What we’re developing in Tampere will end up in the hands of hundreds of millions of users and Mi Fans around the world. That is really motivating,” said Nikkanen in the press release.

Xiaomi was not the first smartphone company to tap into local talents in Finland following the capitulation of Nokia’s phone business. Huawei set up its first R&D centre in Helsinki in 2012, to conduct new technology research for mobile devices, then a new facility in Tampere in 2016, to focus on camera, audio and imaging technologies for consumer electronics.

Ericsson and Nokia up their R&D game to compound Huawei misery

Whenever Huawei is facing scrutiny, rivals simply have to sit back and reap the benefits, though Ericsson and Nokia are upping the focus on research and development to compound the gains.

This is the opportunity which is being presented to Huawei’s rivals. When it is banned from certain markets, there is a gain. When there are security concerns shown, there is a gain. When there are questions about the resilience of the supply chain, there is a gain. All the likes of Ericsson, Nokia and Samsung have to do is sit back and do what they have been doing for years. The worse beating Huawei takes, the better their alternative looks.

What is clear is these companies will have to be as careful when capitalising on the misfortune, tip toeing over broken glass as gunfire rages overhead. Just look at the trouble Nokia CTO Marcus Weldon got himself in when criticising Huawei a couple of months back.

However, looking more closely at the financial reports of the rivals, there is perhaps evidence of an attempt to compound the gains by increasing R&D investments. There are of course numerous reasons why this would be done.

Firstly, if Huawei is considered the market leader for radio and transmission equipment, this is an opportunity to close the gap. Secondly, this is a chance to seize the initiative in the 5G race while the reputation of Huawei is picking up dents. Looking at the numbers, this story becomes a bit more apparent.

Vendor R&D investment as % of total revenues
Huawei c.15%
ZTE 14.9%
Nokia 21.2%
Ericsson 18%

The numbers above are taken for the first six months of 2019. Huawei hasn’t given numbers for the first half, only a full year commitment, so this is more of a rough guess. Samsung does not break-out financials for its network equipment division, keeping up its reputation for being less-than-transparent, so it is difficult to offer a comparison.

Including Samsung with the other four major network infrastructure providers might raise some eyebrows, but with a strong 5G RAN product Samsung now deserves to dine at the top table according to Heavy Reading Analyst Gabriel Brown, particularly in markets where it has made long-term, sustained investment in R&D and in customer support, such as the US, India and South Korea.

After years of investment and working to meet customer requirements, the US market offers promise to Samsung. Without Huawei and ZTE in the game, operators are looking for credible alternatives to the Nokia and Ericsson duopoly in RAN, while its Korean domestic market clearly offers some wins. There is a clear opportunity for growth, though as Brown points out, there are other considerations.

In terms of the 5G RAN, Samsung has competitive base station products according to Brown. However, it doesn’t necessarily have the breadth of portfolio, relationships or footprint to compete globally. Brown stated this is often an area which is underestimated and is expensive to build-up and maintain. Outside of its priority markets Samsung does not have the local support that telcos have come to expect nor the long-term in-country presence that gives operators confidence to do business.

However, it is still an opportunity, with the team is making the right noises, producing the right demonstrations and making the right connections to grow and claim market share.

The numbers above are taken for the first six months of 2019. Huawei hasn’t given numbers for the first half, only a full year commitment, so this is more of a rough guess. Samsung does not break-out financials for its 5G network equipment division, keeping up its reputation for being less-than-transparent, so it is difficult to offer a comparison.

Including Samsung with the other four major network infrastructure providers might raise a few eyebrows but work done over the last few years has raised their game. According to Heavy Reading Analyst Gabriel Brown, Samsung now deserves to dine at the top table, with strong focus on the US, India and South Korea.

Samsung is a company which is clearly benefiting from the Huawei misery. The US is a market which will offer promise to Samsung, though it will have some difficulties considering an ex-CEO of Ericsson is in charge at Verizon, while its domestic market clearly offers some wins. There is a clear opportunity for growth, though as Brown points out, there are other considerations.

In terms of the 5G base station product, Samsung is up there with the best according to Brown, though as it doesn’t necessarily have the relationships or product inventory in place it might struggle in certain areas. Brown stated this is often an area which is underestimated, as Samsung may well struggle to meet the timelines demanded by telcos in Switzerland or Columbia (for example). It doesn’t have the ‘feet on the ground’ or scaled manufacturing experience of its rivals, an element many telcos will have come to expect.

However, it is still an opportunity and the team is making the right noises, producing the right figures and making the right connections to grow and claim market share.

Back to the R&D investments, this is an important metric to judge vendors by and will gain interest from potential customers. At Ericsson, the 18.7% ratio invested in R&D is certainly an increase from the 14% and 15% it spent in 2015 and 2016 respectively. Nokia’s investments are also up from this period, though it has consistently hovered around this level. As a percentage of net sales, R&D accounted for 20.5% and 21.2% for 2018 and 2017 respectively at Nokia.

Although both of these firms are leaping ahead when it comes to the percentage, another factor that you have to take into account is that Huawei is spending more in real terms.

Vendor Total R&D investment in US$
Huawei $8.38 billion
ZTE $900 million
Ericsson $1.93 billion
Nokia $2.53 billion

While Huawei is vastly exceeding the amount spent by its rivals, it has a much broader scope. Ericsson focuses on mobile predominantly, while Nokia has both mobile and fixed businesses, as well as licencing payments from its former glory days as a leading mobile phone manufacturer.

Huawei has its fingers in a lot more pies. Not only does it focus on both mobile and fixed, it also has a subsea cable business and an enterprise unit, while the consumer group is now the largest contributor to total revenues. Looking at the consumer unit alone, Huawei will be investing R&D funds into smartphones, laptops, wearable devices and a new operating system to potentially replace Google’s Android.

This $8.38 billion figure should always be considered when comparing the R&D investments from all the rivals, but it should also be weighed against the broader business exposure Huawei as.

There are of course numerous factors to consider when judging who is winning the 5G race, geopolitical trends are close to the top of the list, but the percentage of revenues being attributed to R&D is another very important one. Although these numbers do not tell the whole story, perhaps it does indicate rivals are attempting to make the most of Huawei’s misery while they have a chance.

ZTE gains confidence on the back of solid earnings growth

Perhaps ZTE has just been enjoying an uncomfortable silence and an expensive milkshake in recent months, but its financials for the first half of 2019 are screaming for attention.

It is quite difficult to measure the performance of the business looking at the financials alone, ZTE found itself in the Trump crosshairs in H1 2018, though the team is hyping itself up now, seemingly to gain attention in a very noisy segment. ZTE is often overlooked when considering the major network infrastructure vendors, but it certainly does warrant mention.

Revenues for the first half of 2019 stood at roughly $6.23 billion, up 13.1% year-on-year, profits increased a massive 118% to $210 million. The team is now forecasting profits between $530-640 million for the first nine months of the year.

These numbers might sound very impressive, but it was at this point last year when President Trump and his administration targeted ZTE. In May 2018, ZTE announced its major operating activities had ceased after the US Department of Commerce’s Bureau of Industry and Security (BIS) placed an export ban on the vendor. Without the US complement in the ZTE supply chain, the firm was almost extinct, though concessions were made and now it appears it is business as usual.

This is why the year-on-year gains are largely irrelevant. ZTE was a shell of a company at this point last year, fighting for its very survival.

That said, the company is surging towards the 5G finish line just like its rivals, and now it needs to convince potential customers it is a stable, reliable and innovative partner. Being selected to supply equipment to any telco will be after intense scrutiny, and thus the charm offensive has begun.

First of all, lets start with the R&D spend. ZTE has suggested it has spent roughly $900 million on R&D for the first six months of 2019, a 14.5% ratio of the total revenues for the period. This is an increase from the 12.8% share of the same period of 2018, with the new figure just ahead of the 13.8% share of revenues (estimate) Huawei allocated to R&D last year. The domestic rival has promised to increase this figure by 15-20% for 2019, though the overall percentage will not be known until the full year financial figures are known.

In comparison, Ericsson said it attributed 18.5% of net sales revenue to R&D over the course of 2018, a figure which increased to 18.7% by the end of the first six months of 2019. At Nokia, 18.4% of net sales revenues were directed towards the R&D department for the first six months of this year.

This part of the business has largely been focusing on the development of basic operating systems, distributed databases and core chipsets most recently. The company has completed the design and mass production of the 7nm chipsets, while it is currently undergoing the R&D phase for 5nm chipsets.

All this work has resulted in 3,700 5G patents being granted to the firm, though this number might notably increase in the near future. ZTE has also said it is partnering with various Chinese universities to source 5,000 new employees to bolster the R&D ranks. Once again, these are numbers which are being cast into the public domain to enhance the reputation of the business at a time where vendors are facing scrutiny at an unprecedented level.

Of course, when we are talking about creating a perception of stability and reliability, as well as increased scrutiny, you have to discuss security.

ZTE might have managed to avoid US aggression over the last couple of months, Huawei has been the primary target, but as a partly state-owned entity, such questions will never be that far away. This is where the cybersecurity centres will play an important role.

Opened in Nanjing, Rome and Brussels, the cybersecurity centres will allow potential customers to test and validate the security credentials of the firm prior to installing any equipment or software in the network. Some will not be convinced this is a fool-proof way to ensure resilience, though it is an act of transparency which the industry and governments have been crying out for.

The result of this work is 60 memorandums of understanding (MoU) with telcos around the world, 50 5G demonstrations in 20 industry verticals, 300 strategic collaborations and 200 5G products to date.

It is often easy to overlook ZTE and designate the firm as a poor man’s version of 5G network infrastructure, but the numbers justify inclusion at the top table. The challenge which ZTE now faces it making prominent strides into Western markets, the very ones which are getting twitchy over security and price today.

Samsung is already planning for 6G leadership – report

Samsung has reportedly announced the formation of the Advanced Communications Research Centre, which will have the mission of creating a 6G leadership position for Samsung.

5G is barely with us and we’re already talking about 6G. This should come as little surprise, such is the length of time it will take to bring the technology to fruition. According to the Korea Herald, Samsung has begun it’s 6G mission as part of the wider Samsung Research business unit.

A currently un-named official announced the news, stating “the current team on telecommunications technology standards has been expanded to start leading research on the 6G network.”

What 6G actually is remains to be seen, but such are the rewards in leading each generation of mobile technology, it would appear it is never too early to cast an eye on the horizon.

Unfortunately for Samsung, it is not the first to the party. In January, LG Electronics and KAIST announced a joint 6G Research Centre in Daejeon. LG has said it wants to use the research centre to pre-emptively secure technology for 6G.

Work has already started for 6G standards. In March, a small group of scientists gathered in Levi, Finland, to host one of the first global summits on the 6G Wireless standard. This was not the most of complex of meetings, though it was aiming to start work on the most important questions; why does the world need 6G?

The answer is relatively simple for the moment; we don’t know.

The technological and business case for 6G will emerge eventually as 5G gains more traction around the world. As with 5G in the 4G era, forward-thinking engineers predicted the demand for increased speed, more efficient spectrum use and efficiencies to drive profitability. 5G does of course offer more, but you only need a framework to build on to start with.

This is what the initial 6G forays will be based upon, but it is important to understand what the short-comings of 5G are. The problem needs to be understood before a solution can be crafted, otherwise, what’s the point?

Huawei R&D faces export ban in Silicon Valley

The US Commerce Department has refused to renew an export licence at a Huawei subsidy in Silicon Valley, meaning China cannot access new developments at the site.

According to the Wall Street Journal, Huawei R&D outfit Futurewei was informed over the summer that the US Department of Commerce would not be renewing the license meaning some of the technologies developed at the site, but not all, could not be exported back to China. It’s a new strategy in the conflict between the US and China, but it could prove to be an effective one.

Silicon Valley is not the hotspot of the technology world because of the favourable climate or the presence of helpful regulations, it has one of the most talented workforces around the world. There are of course challengers to this claim emerging, India or Eastern European for example, but companies flock to Silicon Valley to open up R&D offices to tap into this resource. Such a ban from the US Commerce Department means Huawei is going to miss out on some of these smarts.

The block will prove problematic to overcome as there does not appear to be any logical way to combat the move. The rationale behind the blockage is quite simple; national security. Seeing as Huawei is currently being trialled and punished without the burden of evidence, there seems to be little the vendor can do to combat such passive aggressive moves by the US.

This is of course just another stage is the incrementally escalating conflict between the US and China. The tension between the pair does seem to have escalated over the last few days following a minor hiatus at Christmas. Rumours are circling the Oval Office concerning an all-out ban on Huawei and ZTE technology in the US, while suspicions will only increase following the arrest of a Huawei employee in Poland on the grounds of espionage.

With all the drama before Christmas and the hullaballoo kicking off again now, perhaps we should expect some sort of retaliation from Beijing. The Chinese governments has not been anywhere near as confrontation as the US, though there might be a breaking point somewhere in the future.

Ericsson ups US investments in search of regionalised relevance

Ericsson has announced it will increase investments for R&D in the US as it revs its engines in pursuit of much-hyped 5G market share.

Increased investments in R&D is nothing which should be applauded, it is after all a monumental shift in the telecommunications and technology industry, and therefore should be expected. That said, Ericsson seems to be sending a message to the world with the focus on the US; Huawei continues to find itself on the sh*t list, so we are going to dominate this market.

“The increased investment is to support accelerating build out and rapid deployment,” said Ericsson’s Head of Networks, Fredrik Jejdling. “All about working with our customers more closely.”

While increasing the focus on the US might not be the greatest endorsement for the manufacturing capabilities or employee competence in Europe, Jejdling pointed out this is not a shift away from the continent, but Ericsson’s localisation strategy. This is where Huawei has found success in recent years, its engineers have been on hand to help development and deployment. These investments are focused on adapting R&D focus for the individual needs of the market.

For example, while the US is primarily focused on enhanced mobile broadband and fixed wireless access, China has prioritised IoT. There isn’t necessarily a wrong answer for the 5G focus, but by moving R&D centres closer to customers, Ericsson is able to adapt operations to local demand. Jejdling also highlighted the strategy will allow the business to create a more flexible supply chain, working with manufacturers in the specific regions to shorten development lead time and bring products to market quicker.

“We need to make sure we are relevant to each customer,” said Jejdling. “It’s all about serving the markets in their own way.”

The US is currently Ericsson’s largest market, accounting for a quarter of the firm’s business over the last seven years. The absence of market leader Huawei is almost certainly working for the benefit of Ericsson, but the reasons don’t actually matter that much. The vendor landscape is highly unlikely to change considering the political paranoia towards China and its vendors; Ericsson’s decision to double-down on the US and capitalise on the opportunity is a very sensible strategy.

What is worth noting is this is new investment from Ericsson. Just because the US is getting attention right now, does not mean investments will be decreased in markets such as Europe. Accoring to Jejdling, this is not a trade-off, at the very least, investments will be sustained in Europe.

“One of our big manufacturers is in Talin, and so are some of our biggest research sites,” said Jejdling. “This announcement is not about moving away from Europe, but expanding in the US.”

Looking at the focus of the R&D investments, there are three areas of particular interest. Firstly, the Austin ASIC Development centre will receive some additional attention, as well as 80 more bodies. It might be worth noting, one of the AT&T research labs focusing on IoT manufacturing, retail and data analytics, is conveniently located a 50 minute flight away in Plano, Texas. The second will be a baseband software development centre, which will be staffed by 200 new employees. Finally, an artificial intelligence research centre will be located in California, close to the Silicon Valley technology hub, and will account for an additional 100 hires.

The focus for the AI research centre seems to be around machine learning and network automation technologies, these are closest to Ericsson’s core competencies after all, though Jejdling commented this is a relatively blank script for the moment. The team will lead with the demands of the market, which is still trying to grasp the potential of the technology.

“R&D for AI is in the process of being established,” said Jejdling.

While some might worry over the lack of concreteness around AI developments, it is worth noting this is the new status quo in the development world. The companies who have made best use of new breakthroughs in the world of intelligent technologies are the ones who adopt a fail-fast business model. These developers are adaptable and scale dependent on external factors such as market demand and parallel technological breakthroughs. Should Ericsson want to bolster its credentials in the software work, some might comment it is flagging currently, it will have to embrace this new, un-telco, mentality.

As a strategy, increasing investments in the US is certainly a sensible one. US customers account for a significant chunk of the Ericsson spreadsheets as it stands, therefore it would be a perfectly reasonable place to start the 5G assault, capitalising on established relationships. The strategy also has a Huawei feel about it. The Chinese firm has a reputation for accessibility, placing engineers close to customers to improve customer service. Consider the success over the last few years, why shouldn’t Ericsson take a lesson from the Huawei playbook.

Former Qualcomm CEO launches 5G startup

Paul Jacobs, who ran Qualcomm for a decade, has launched a new company designed to tackle technological challenges faced by next-gen mobile communications.

The company is called XCOM and currently has very little to say for itself other than listing Jacobs (center, above) as CEO, former Qualcomm President Derek Aberle (right) as COO and former Qualcomm CTO Matt Grob (left) as, you guessed it, CTO. There might not be a press release but at least there’s a hashtag – #keepinventing – although it doesn’t seem to have caught on yet.

Aberle seems to have granted interviews to a couple of US media. “Our feeling is there’s not enough investment happening around communications and wireless tech in the US in particular,” Aberle said to CNET.

“There’s still a fair amount of work that needs to be done to prove out the applicability of 5G through various Internet of Things applications,” he told CNBC. “We feel we have some better ideas for how to do some of that stuff.”

So it seems like we’re looking at an R&D company that will seek to license its patents to the broader telecoms world. This would seem to play to the strengths and experience of these former Qualcomm execs and they’re already recruiting engineers.

When Jacobs left Qualcomm earlier this year he expressed a desire to take the company founded by his father into private hands. Aberle made it clear that this project is unrelated to the Qualcomm stuff.

“It’s unclear where the take private plan will go or how long that will take,” Aberle told CNBC. “But this is not an either/or. We are pursuing this new company and we have high expectations and confidence in the take-private plan.” In the CNET interview he said that process may be contingent on how the NXP thing plays out.