Sina Tech, 1/07/08
Ericsson and the Datang Telecom Technology Group announced today the creation of the Datang-Ericsson LTE Research Center, to focus on the development of LTE technology for TDD, the long-term evolution technology for TD-SCDMA.
LENS: Ericsson, whose 3G focus has been WCDMA, is making a sound move in hedging its bets and working together with Datang on a TD-SCDMA-based 4G solution for the China market:
3G vs. 4G
China has demonstrated a dogged determination to popularize TD-SCDMA before opening the door to WCDMA and CDMA2000 EV-DO, but continues to struggle with issues of the domestically developed standard’s technological immaturity. As ongoing problems with handset development and base station locations now threaten to delay commercial launch of TD-SCDMA until after the August 2008 Beijing Olympics, there are increasing signs that China may be on the verge of a refocus to 4G. Headed down this path, China would almost certainly continue with the development of the TD-SCDMA networks in the current 10 trial cities, showcasing whatever services it could during the Olympics, but would not expand deployment to further locations. It would then rely on upgrades of the existing GSM networks to EDGE to meet consumer needs over the next few years, during which it would continue to work on a TD-SCDMA-based 4G solution.
35% 2G Market Share vs. 1% Market Share in TD-SCDMA Trial Bidding
China has come to play an increasingly important role in Ericsson’s overall global performance, with a 35% YoY drop in Q3 2007 global net profits attributed largely to a decline in the company’s China sales. In 2007, although Ericsson still boasted 35% of China's 2G network equipment market, it is much less well positioned in the country’s future 3G/4G market. In China Mobile's bidding for TD-SCDMA trial networks, Ericsson lagged behind Chinese competitors and even foreign counterpart Siemens, whose JV with Huawei secured a 14% share. Ericsson landed only 1.24% of the total contract value via its OEM partnership with ZTE. In order to remain competitive in China, Ericsson needs to formulate a strategy for improving its standing, both in terms of technology and government relations, as a provider of China’s favored 3G/4G standard. Allying with Datang on a TD-SCDMA LTE standard, Ericsson can achieve both these goals; by helping Datang develop a more reliable TD-SCDMA-based 4G technology, it helps both Datang and Datang’s patron, the MII, save face, and at the same time becomes a key TD-SCDMA equipment provider.