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.

Ericsson lands €250mn 5G loan from European Investment Bank

The European Investment Bank has signed a €250 million loan agreement with Ericsson to boost the vendors R&D efforts in 5G.

The cash will be made available through the European Fund for Strategic Investments (EFSI), a joint initiative between the EIB and the European Commission, with the focus on development of hardware and software for the Radio Access Network (RAN). Most of the R&D activities will take place in Sweden, with minor parts also being carried out in Ireland, Spain and Poland.

“The development of 5G technology is easily one of the most important innovation initiatives for the telecom industry in the coming years. Ericsson has been one of the defining contributors to what mobile telephony is today and I think we can only be proud to support this,” said Alexander Stubb, Vice-President of the EIB. “Apart from supporting European technology, this project will also make sure that thousands of highly-skilled jobs will stay in the EU.”

“When it comes to developing 5G technology, we need to up our game in Europe,” said Jyrki Katainen, European Commissioner for Jobs, Growth, Investment and Competitiveness. “I am proud that Ericsson – a European company – is investing heavily in preparing for 5G with the EU’s financial backing. Being a leader in telecoms is crucial to maintain our competitiveness on a global stage so sufficient investment in 5G is strategically important for Europe.”

Looking at the investments being made by Ericsson, the loan will certainly help the vendor in the quest for 5G glory. During the course of Q1, Ericsson invested just short of €900 million in R&D programmes, which accounted for roughly 20% of net sales for the period. In terms of comparison, Nokia invested €1.1 billion, or just over 23% of revenues brought in over the three months.

With early deployments set to kick-off towards the end of this year, and the majority to be set in motion by 2020, a €250 million loan will certainly help the Swedes prove their 5G credentials.

Pompous politicians start parading after Huawei’s £3bn UK announcement

MPs across the UK have started cracking the whip in the press room as each ego proclaims its own importance in securing £3 billion in procurement from Huawei over the next five years.

The announcement comes after Prime Minister Theresa May’s trip to China where Huawei Chairperson Sun Yafang committed at least £3 billion in procurement spend in the UK over the next five years. While such announcements are generally viewed as flimsy promises, the pair also announced Huawei had spent £2 billion over 2012-2017, which exceeded the £1.3 billion commitment made five years ago. Huawei came good on that promise so there is no evidence to say it won’t do it again.

What is interesting is this announcement only focuses on procurement spend over the next five years. Huawei told Telecoms.com this morning to keep an eye out for announcements over the next couple of months, as there will be a few more cheques written focusing on the investment side of the business. Details are commercially sensitive for the moment, but Huawei has been focusing on intelligent network solutions for its carrier business and AI on the consumer side of things. It would be a safe bet.

“Huawei values long-term partnership,” said Yafang. “The UK was one of the first international markets we entered, when we opened our first office there in 2001. We have now been working with our major customers in the UK for more than twelve years, helping to build a better connected UK. Over the coming years we look forward to continuing to collaborate with our customers and partners to help keep the UK at the very forefront of the digital age.”

Right now Huawei has three R&D centres across the UK, one in Cambridge which is focused on chip solutions and another two joint innovation centres with BT and Vodafone. The last couple of years has certainly seen Huawei increase its footprint within the UK, though the team is keeping tight-lipped on what the money will actually be spent on. This is not unusual, it is commercially sensitive after all, but it is a win for certain MPs.

“Huawei’s £3 billion announcement is yet another significant vote of confidence in our world-leading tech industry and I’m delighted to welcome their increased commitment to the UK,” said International Trade Secretary of the UK, Liam Fox. “With 90% of global growth forecast to come from outside the EU, my international economic department is working to ensure Britain continues to benefit from the vast opportunities available as we leave the EU.”

We can just imagine the headlines over the next couple of days as pro-Brexit politicians point to this investment as a promise that the expensive divorce won’t be that bad for the British people. Let’s not forget however that leaving the EU is going to have little impact on the technology world, or at least nowhere near the same impact as the more traditional industries.

The older the industry, the more genuine the threat is from the divorce as they are more tightly regulated. Aside from data protection and residency regulations which are being drafted at the moment, the technology industry operates in relative freedom; globalization of the supply chain was something which the industry was born into not forced upon it. Some countries might be trying to impose localized regulations to protect certain domestic industries, such as agriculture or automotive, but this is not as prominent in the tech space.

Don’t read too much into the MPs posturing as you’ll probably have to swallow numerous PR quips over the next couple of days. Might also be worth keeping an eye out at the Department for Digital, Culture, Media and Sport as there will probably be a self-indulgent statement before too long, while Minister for Fun Secretary for State Matt Hancock will most likely find a party to celebrate at this evening.

ZTE flogs $2bn shares in effort to be 5G ready

ZTE board members have approved the issuance of 686,836,019 A Shares in an effort to raise capital for 5G research and development.

While ZTE could sometimes be seen as a poor man’s Huawei, in truth it is just as threatening to the more traditional network infrastructure vendors. Over the last couple of years, Huawei might have been grabbing the headlines and second helpings of global market share, ZTE has also been eating into the profit margins at former world-beaters Ericsson and Nokia.

It might still be sitting in fourth place, but looking at the most recent financial figures it is certainly heading in the right direction. For the nine months ending September,  ZTE boasted of operating revenues of roughly $12.2 billion, a 7% increase for the same period in 2016. When you compare this to Ericsson or Nokia’s quarterly results for the same period,  6% and 7% decline respectively, the story starts to make a bit more sense.

There still is a considerable buffer for ZTE to catch Nokia and Ericsson, but it is consistently heading in the right direction. Huawei has also shown how quickly the status quo can be changed as well.

Puffing out its chest, ZTE is now showing it means business when it comes to 5G. Adding to the billions it has spent or planning to spend on 5G R&D already, the team will also be selling off 686,836,019 shares on the Shenzhen and Hong Kong stock exchanges to raise $2.1 billion. The majority of this will be directed towards ‘research and product development relating to 5G network evolution’, while roughly 30% will be replenish working capital.

“With the global leading position in 5G network sector, the Company expects that 2018 to 2020 will be a crucial period for the formulation and industrialization of the global standard for 5G technology,” the filing states.

“The Company considers that the Proposed Non-public Issuance of A Shares will enable the Company to maintain its high level of investment in research and development, help ensure its technological competitive edge and develop its main products and businesses with core advantages, which may help the Company increase its market shares in the mainstream products and markets as well as enhance customer satisfaction, thereby help increasing the profitability of the Company.”

An extra couple of billion is certainly something to boast about a couple of weeks ahead of Mobile World Congress. This year’s event promises to be a bombardment of euphoric 5G promises as vendors scrap for the attention of wide-eyed operators. ZTE seemingly profited quite handily out of the 4G evolution, and it would seem it is positioning itself well ahead of the 5G slug-feast.

Huawei goes on a road-trip

Networking vendor Huawei’s quest for global domination shows no sign of slowing in the run up to Christmas, with raids on Dublin and Cairo.

There’s nothing Huawei likes more than photos of people in business attire, symbolically shaking hands or signing important-looking pieces of paper. Visits to Trinity College, Dublin and the Cairo ICT conference afforded rich pickings for the company photographer.

A new research partnership with Trinity is, we’re told, emblematic of Huawei’s growing R&D footprint in Ireland. Rotating CEO Guo Ping and Patrick Prendergast – Provost of Trinity – can be seen below holding up bits of paper in time-honoured fashion. Apparently Huawei is dropping $21 million on R&D in Ireland this year.

Huawei Dublin

“Huawei’s continued investment in Ireland illustrates the innovative technology ecosystem we have developed, with more and more major international tech firms basing and growing their operations here,” said Irish Taoiseach Leo Varadkar (pictured below, with Guo Ping). “The company’s new research partnership with Trinity and its expanding R&D footprint across its Dublin, Cork and Athlone operations are a strong endorsement of Ireland’s tech credentials and illustrates Huawei’s ongoing commitment to its Irish operations. Bilateral trade between Ireland and China is now worth over €12 billion each year, and by strengthening our links with companies like Huawei we can increase this further in the years ahead.”

Huawei Varadkar

Meanwhile Huawei launched the Cairo OpenLab in… Cairo, during the Cairo ICT 2017 conference, also, conveniently, in Cairo. It managed to get a bunch of dudes to take a commemorative photo of the occasion, which you can see at the top of this piece.

“We established the OpenLab in Cairo so that we can make full use of the advantages of Egypt and serve all of Northern Africa,” said Ni Zheng, President of Huawei Enterprise Business Group, Northern Africa Region. “First, the ICT industry market in Cairo is relatively mature and its marketing capabilities influence surrounding countries.

“Second, Egypt recognizes the significance of industrial digital transformation, and the local industry chain ecosystem supports this transition for a number of industry enterprises. In addition, the education industry in Egypt is relatively well developed, with more than half of the top 15 African universities of UK QS Ranking located in Egypt, also contributing to the advancement of the region.”

Lastly, back in China, Huawei Wireless X Labs was instrumental in the creation of a Wireless Connected Factory Special Interest Group (SIG). This is actually the third SIG this bit of Huawei has got involved in, and looks set to be a cracker, with half of the company apparently involved in the inevitable photo (below).

“The mission of exploring future wireless use cases lies with X Labs,” said Ying Weimin, Huawei Wireless R&D President. “Huawei hopes that SIGs such as those set up by X Labs can discover and inspire many more 5G use cases and promote 5G technologies’ application in future smart manufacturing. Such efforts will contribute to the rise of connected factories. Huawei will work diligently alongside its partners to simulate further growth and innovation.”

Huawei SIG

Alibaba sets aside $15bn R&D war chest to be a world beater

How do you try and become one of the biggest and most influential technology companies in the world? Just move the $15 billion you have stashed away into the R&D business.

This might not be realistic for most companies, but apparently it is a goer for Alibaba. This is a company which has serious ambitions to emulate Huawei on the global stage. By 2036, the company wants to serve two billion consumers, create 100 million jobs around the world and serve 10 million companies through its various platforms and services. It certainly aims high.

But wishing big is never enough; there has to be some substance behind the dream. This is the part of the equation which most cash-shy telcos seem to be missing. Over the next three years, Alibaba will invest $15 billion into future applications of the technologies which we are finding out about today. Some might say it sounds similar to the Moonshot labs over at Google, and why not try to emulate one of world’s most successful businesses.

“The Alibaba DAMO Academy will be at the forefront of developing next-generation technology that will spur the growth of Alibaba and our partners,” said Alibaba Chief Technology Officer Jeff Zhang at the company’s Cloud Computing Conference (thank you to Alibaba’s news service for a breakdown of the conference).

“We aim to discover breakthrough technologies that will enable greater efficiency, network security and ecosystem synergy for end-users and businesses everywhere.”

Just in case you are wondering, DAMO is an acronym for Discovery, Adventure, Momentum and Outlook. The initiative will open seven labs in Beijing, Hangzhou, San Mateo, Bellevue, Moscow, Tel Aviv and Singapore, initially hiring an additional 100 researchers, though this will increase. The initial focus areas will include data intelligence, the Internet of Things, fintech, quantum computing and human-machine interaction; the type of tech which people are hoping will turn business on its head.

Alibaba looks to be one of those companies who has the ambition to take on the technology world, but let’s hope a slowish start does not count against it. Cash injections in the R&D department are certainly a good sign, but perhaps reaching out to the international community is a much more positive one. Widening the international footprint is a necessity to ensure a business is capturing the best talent, and this is where Alibaba has been lacking to date.

When you look at all the Chinese firms who have successfully ventured (or hoping to) into the international arena, research has been geographically diverse. Huawei is all over the place, ZTE is getting more prominent as well. Tencent has announced plans to open up an AI research site in Seattle and Baidu has a research centre in Silicon Valley specializing in big data, deep learning and artificial intelligence.

Alibaba is slow off the mark in this regard, but first off the line doesn’t always mean first to the finish.

Liberty Global makes another big European R&D investment

The Telenet Innovation Center in Brussels joins and equivalent R&D hub in Amsterdam as Liberty Global tries to get ahead of emerging tech trends.

Belgian operator Telenet is owned by Liberty Global and has b identified by its parent company as a good place to mull over the challenges and opportunities presented by emerging tech megatrends such as 5G and IoT. It joins Liberty Global’s Tech Campus near Amsterdam and the two will also investigate other tech opportunities for the group.

“The opening of the Telenet Innovation Center is an important milestone for Liberty Global,” said Balan Nair, Liberty Global Chief Technology and Innovation Officer. “The cutting-edge infrastructure and Telenet’s fully owned mobile network provide the perfect conditions for us to test the products and services that can pave the way towards the GIGAWorld. I’m already excited about the opportunities and inspiration that await us.”

“With the Telenet Innovation Center, we want to be ambitious and bring our own innovations to a higher level, but also help shape external innovation projects,” said John Porter, CEO of Telenet. “I believe in the absolute strength of partnerships, so I am convinced that with our model of collaborative innovation and with the help of partners like ZTE, we can bring the best broadband and media technology to Belgium for thorough testing, experimentation and successful launch in our market.”

Paolo Pescatore of CCS Insight popped over for the grand opening. “For Liberty Global, this is a huge investment,” he said. “It shows a strong commitment to grow its presence in the rapidly changing and converging European landscape.

“Consumers’ insatiable appetite for connectivity and content is showing no signs of easing up. Cable and telecom providers’ are under huge pressure to stay at the forefront of innovation. They need to move at lightning speed as online giants are pushing boundaries even further. The increasing demand for IoT solutions and the arrival of 5G, opens up a wealth of opportunities and it is important that the networks are equipped to deal with the explosion of data traffic and to serve the emergence of new use cases.”

Among the stuff showcased on the day was a special demo room for ZTE, which as we heard is a close partner of Telenet. There was also the good old AI robot, which as you can see from Pescatore’s tweet below, managed to get a crucial question right.

 

Amazon spends 193x more on R&D than Deutsche Telekom

Everyone is innovative if you believe what they say, but few companies could even dream of playing the same R&D game as the worlds’ tech big boys.

Although it would be considered a relatively simplistic method of judging future success of a business, the money being spent on research and development is a good indication. This is of course no guarantee of success, but it at least provides some guidance. Data from Factset has revealed the biggest R&D spenders in the US are the tech companies, and it should come as little surprise who is at the time of the list.

Amazon hits top-spot, with $16.1 billion spent on R&D last year, with Google hitting second at $13.9 billion, Intel in third at $12.7 billion, while Microsoft and Apple complete the top five with $12.3 billion and $10 billion respectively.

Amazon has proven once again to be a company which cares more about the long-term, bigger picture, than quarterly dividends and pressure from those who want an immediate pay-off. The gap at the top is quite considerable, especially considering Google, a company not known for being shy in the R&D space, is in a notably distant second.

Perhaps the question should be what Amazon is actually spending money on? It turned the retail space on its head with an aggressive investment strategy similar to this, so what vertical should be keeping an eye out? The virtual assistant and smart home space by the looks of it.

The battle with Google for control of the living room is a very public one, but recruitment evidence may also give an indication this is the top priority for Amazon. The Alexa business unit is hiring hundreds of software engineers, having been given preference over other business areas, while Tom Taylor has been appointed as the units chief. Taylor has quite a reputation in the business, known for scaling high-growth operations. The omens are pointing towards Alexa.

But how does this compare to the rest of the world, and also those in the telco space?

Looking at the giants of the technology world, the US is still leading the charge. YCharts estimates that the Chinese firms are spending big, but not it the same ballpark. Over the course of 2016, Baidu put $1.525 billion into R&D, while Alibaba hit $2.53 billion. In Korea, Samsung was more in-line with Silicon Valley, accounting for investments of $12.14 in 2016, while Japanese Sony decided to put $4.09 billion investment into the future.

On the telco side of things, money is being spent in the places you might expect. Huawei, the staggering leader in the infrastructure game, is able to compete with Silicon Valley’s best and brightest, with roughly $11.27 billion of R&D spend across 2016, while Ericsson and Nokia once again languished with $3.9 billion and $5.49 billion respectively.

Looking at the operators, they were surprisingly quiet. Not in terms of chest beating or declaring they are the best things ever. No, the arrogant operators were excellently equipped to tell us they are truly innovative, but when it comes to actual evidence there is little to shout about. We had a look on the Orange, AT&T, Vodafone and Verizon websites and were unable to find much information about concrete investment in R&D.

The only one we were able to find a specific number was Deutsche Telekom. Here, those crafty Germans managed to pump €84.1 million into R&D. We suspect the investment levels won’t be too different when you look at the other operators. We’re not saying operators should be spending billions, but this is a meagre amount, accounting for 1.13% of total revenues. Huawei in comparison puts 15% of total revenues into R&D, while Amazon stood at almost 12%.

And there is perhaps the reason why the telcos are viewed as completely un-innovative. They aren’t attracting the right people or spending on R&D. Is it any surprise the industry is being relegated to the highly regulated role of utility? The operators aren’t helping themselves at all, merely presenting themselves as custodians and misleading marketers, as opposed to a critical aspect of the technology ecosystem.

The telcos are important and will continue to be important, but not in the way they necessarily want to be. IoT is an area which could have turned fortunes, but the investment levels remained low. The telcos will capture the connectivity revenues, but this is only a small slice of the pie; what about the rest? What about the digital transformation fortunes which even seems eager to claim? Not likely. The Accenture’s or IBM’s or CapGemini’s of the world are doing well to secure these.

Once again, the dumb pipe phrase will raise its ugly head, and it can hardly be blamed. The operators are contributing to their own downfall.