Ericsson today reported earnings that underline key trends in the mobile network infrastructure market, including the impact of ongoing tensions between China and some Western countries, the supply chain crunch, and growing enthusiasm for enterprise 5G.

The Swedish vendor, which is increasingly being squeezed out of the Chinese market, reported a $418 million sales decline in the world’s largest country during the third quarter of 2021. CEO Börje Ekholm blamed that loss on retaliatory measures resulting from “decisions Sweden took to exclude Chinese vendors in the build-out of 5G networks in Sweden.”

Ekholm, during the earnings call, told analysts and investors that Ericsson isn’t giving up on winning back some business contracts in China, but warned there will be some “restructuring cost” during the fourth quarter as Ericsson slashes its employee base and operations in China. 

The losses were partly offset by growth in Europe and Latin America, “but of course it’s quite clear the loss of sales in China hurts our sales volume in total. And we need to invest more to regain that loss of volume by growing in other markets,” Ekholm said. 

Ericsson also encountered some turbulence in the supply chain near the end of Q3, after successfully claiming “very limited to no impact” until that point, according to Ekholm. Shortages of individual components resulted in the loss of some sales and higher inventory, and Ericsson expects this to be an ongoing risk for the company in the fourth quarter.

The vendor entered Q4 with a new, multi-year contract to supply 5G radio access network (RAN) equipment and software to AT&T for its mid-band 5G deployment activities. Nokia earlier this year landed a similar contract with AT&T.

AT&T declined to disclose the value of its contract with Ericsson, but Ekholm noted that Ericsson has secured 5G contracts with AT&T, T-Mobile US, and Verizon, and described the contracts as “the largest in our history at Ericsson.”

“Both Ericsson and Nokia will provide radios and baseband units for AT&T’s mobility network and most specifically for the radios in this new [C-band] spectrum,” an AT&T spokesperson said. Some of those C-band radio deployments are underway as the operator works to activate the service later this year.

Ericsson revealed a new massive MIMO 5G radio for mid-band spectrum near the end of Q3 that David Hammarwall, head of product line radio, claimed to be “the lightest and smallest Massive MIMO radio in the industry.” The AIR 3268 joins other massive MIMO 5G radios Ericsson introduced earlier this year.

Customers are receiving volume shipments of Ericsson’s AIR 6419, which is designed for maximum capacity in high-rise installations, and AIR 3268, which targets mid-to-low rise deployments, is scheduled to reach the market in the first half of 2022, Hammarwall wrote in response to questions.

Ericsson, as of today, has inked 149 commercial 5G contracts with operators and has equipment running in 95 live 5G networks. The vendor also reported 45 5G standalone core contracts to date, including eight which are live today. 

The vendor intends to make its core mobile networks business a fundamental focus going forward, Ekholm said. “The 5G development curve, even though it’s been growing sharply now and growing great now, it will flatten out or it’s at least likely to flatten out” in the coming years, he said.

“This is a pattern we’ve seen in other Gs before,” however opportunities in the enterprise market are new for the 5G era, and growing, according to Ekholm. 

“We believe that is going to drive traffic into the networks and actually provide a much longer investment cycle in the networks. But it will also start to open up for new segments to be attacked with mobile communication,” he said.

More enterprises are turning to wireless networks for primary connectivity and “this is very different,” Ekholm said. “We believe this opens up new markets for us that could be worth up to $25 billion by 2025.”

Cradlepoint, an enterprise WAN company Ericsson acquired last year for $1.1 billion, plays a central role in that effort, according to Ekholm. The vendor’s Emerging Business and Other segment, which includes Cradlepoint, generated a 26% year-over-year jump in revenue to $232 million during Q3.

Ericsson’s Networks business unit reported a 3% year-over-year decline in revenue at $4.7 billion. Digital Services revenue dipped 1% to almost $999 million and Managed Services slid 8% to almost $581 million.

The company banked $673 million in net income on almost $6.54 billion in revenue, reflecting a 4% year-over-year gain in profit and a 2% decline in sales.

Sales in North East Asia fell by 33% “due to the significantly lower market share in Mainland China,” Ekholm said. Sales in Southeast Asia, Oceania, and India decreased 16% year over year, and Middle East and Africa sales slid 10% during the same period.

Europe and Latin America sales jumped by a combined 9%, including 5% in the former and 29% in the latter, and North America sales increased 13% during the quarter.

Ericsson ended the quarter with 102,203 employees, a 0.5% increase in headcount from the previous quarter mainly due to increased investments in research and development. Indeed, the vendor spent $1.18 billion on research and development activities during the quarter, focused largely on the cloud-native 5G core portfolio and enterprise opportunities via Cradlepoint.