Ericsson is bolstering its 5G focus in the United States, announcing plans to increase research and development spending, opening up a new software development center, hiring several hundred new workers, and producing 5G equipment stateside targeted at the North America region.

Niklas Heuveldop, president and CEO of Ericsson North America, said the moves put company resources and innovation closer to important customers in one of Ericsson’s largest markets. He noted that the U.S. has accounted for at least 25 percent of the vendor’s overall sales for the past 7 years.

“I’ve been impressed with the activity in the U.S., especially with IoT and industrial IoT,” Heuveldop told SDxCentral. “And there’s a lot of excitement in the investment community as well. The U.S. is on fire.”

Ericsson has struck 5G deals with a handful of North America operators, including Verizon, T-Mobile, and Rogers in Canada. That momentum has impacted rival Nokia, which caused investors to question whether there was a growing North America market share battle between the two Nordic vendors.

Heuveldop also cited Ericsson’s recent update to its North America 5G subscription forecasts that now predict 5G connections will account for 48 percent of all mobile connections by the end of 2023. The vendor late last year had that number at 37 percent.

As part of the new investments, Ericsson will open a software development center focused on network baseband components. This will include hiring more than 200 software engineers for the facility.

Those baseband components provide intelligence to the radio access network (RAN). They also provide the interface between the core network and radio units, processing and forwarding voice calls, and internet data.

The baseband work will run alongside Ericsson’s previously announced ASIC design center that it set up in Austin, Texas. That facility currently has around 50 employees focused on core microelectronics of 5G radio base stations, with plans for 80 total employees by year-end.

Combined, the two facilities will introduce 5G products and software features into the Ericsson portfolio beginning next year.

“We are now adding in the baseband software unit, which is an important part of the radio network and is really where the intelligence is,” Heuveldop said.

He did note that the software work will not be connected to Ericsson’s deal with Cisco. “This will be different,” Heuveldop said.

That partnership has struggled to gain traction, which Cisco has attributed to a rash of leadership changes at Ericsson. Heuveldop was part of those changes, having taken over the vendor's U.S. operations last September following the departure of Rima Qureshi. She eventually ended up at Verizon alongside former Ericsson CEO Hans Vestberg.

Ericsson is also increasing its investment in artificial intelligence (AI) that will see it employ around 100 specialists in North America by year-end. Those efforts will focus on utilizing AI technologies to accelerate automation, examine product road maps, and explore new business opportunities.

For its manufacturing plans, Heuveldop said Ericsson would initially work with current partner Jabil that has a facility in St. Petersburg, Florida. That location will begin manufacturing radio equipment during the fourth quarter and allow for quicker deployment of equipment to support 5G deployments already underway.

Heuveldop said Ericsson would then take the next couple of quarters to evaluate whether it makes sense for the vendor to open up its own manufacturing facility in North America. “We will give ourselves some time to look at what makes sense from a demand perspective for standing up our own production over time,” he said.

The investment news comes on the heels of Ericsson posting its first quarterly operating profit in more than a year. The vendor reported a $23 million operating profit in the second quarter, boosted by cost-cutting measures and growing momentum behind 5G deployments.

The company said that it had met its restructuring plan goal of achieving a $1.1 billion run rate by mid-2018. Ericsson instituted a cost savings plan back in November 2014. “Now, it’s business as usual,” said Ericsson CEO Borje Ekholm, adding that the company has a much more competitive cost structure than it did a year ago.

Heuveldop said the U.S. investment plans align perfectly with the broader restructuring. “This goes hand-in-hand with our focus on increasing R&D in areas we want to focus on,” he said. “5G and AI are prioritized areas.”

Ericsson had cut around 18,000 jobs since mid-2017 as part of the restructuring plan. But, earlier this year it said it had added 500 engineers to its research and development team to focus primarily on 5G.

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