China’s feeble threat to Ericsson and Nokia

As the US maintains its chokehold on Huawei, cutting off the Chinese vendor’s supply of vital components, China appears to have telegraphed its latest threat.

Should European authorities fail to comply with its wishes – namely, that no restrictions be imposed on the ailing Huawei – China will push the little red button that stops the European vendors from exporting any goods they make in China, according to a report from the Wall Street Journal.

If this is true, then China’s government does not seem to have realized that Ericsson and Nokia have been evacuating the danger zone ever since Trump took a dislike to China-made products. Its supposed counterstrike would do minor damage to the European vendors. Most of the casualties would be Chinese.

Chinese exodus
Ericsson has been the most transparent about its recent efforts to shift production closer to customers. The clearest example came last year when it opened a new facility in Texas to serve all North American needs. Another one in Estonia caters to European customers. Automation has minimized costs, especially at the Texas facility, which employs just 100 people.

Of the seven manufacturing sites listed in Ericsson’s last annual report, only one is in China, along with just one of four service delivery centers. Research and development (R&D) happens across 15 global sites, 14 of which are outside China.

Nokia also seems to have limited exposure. Only one of its ten factories is Chinese and that last year accounted for just 18% of production capacity for radio frequency systems. Basestations, submarine cables, radio controllers and transmission systems are all manufactured elsewhere. A global network of 18 R&D centers includes just one inside China.

This does not mean there would be no damage. Ericsson’s Nanjing facility exports goods to Australia, among other countries. If China blocked those shipments, Ericsson would not be able to serve major customers such as Telstra, Australia’s biggest mobile operator.

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