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Ericsson to Build Fully Automated 5G Smart Factory in Texas

Zacks Equity Research

Ericsson ERIC recently unveiled plans to develop a fully automated smart 5G factory in Lewisville, TX, to cater to the increased demand for 5G deployment across North America. The 300,000-square-foot state-of-the-art factory is the first of its kind by the company in the United States, and reinforces its commitment to offer fast and secure 5G connectivity in the country through strategic investments.

Powered by Ericsson’s 5G industrial solutions, the factory will begin commercial production in early 2020, primarily focusing on 5G and advanced antenna system radios to boost network capacity and coverage. The factory will feature automated warehouses, connected logistics, automated assembly, packing and product handling, and autonomous carts, involving a direct investment of $100 million. It will initially employ about 100 people for modular and flexible production setup to enable quick ramp up and rollout of 5G equipment.

The factory is likely to accelerate the development of 5G ecosystem with a perfect blend of IoT, AI and ML techniques and fill the void created by the various trade restrictions on Huawei for seamless deployment of 5G technology across North America.

Ericsson is focusing on sustainable business practices for developing the smart factory, including friction-free magnetic levitation chillers and thermal energy storage banks for storing ice at night and melting during the day to provide cooling. Solar panels and 26,000-gallon tanks are likely to be installed for generating onsite renewable energy and harvesting rainwater, respectively. The company further aims to secure LEED Gold and LEED Zero Carbon certifications for the factory for being more energy efficient than comparable buildings.

Notably, Ericsson has just completed the upgrade of its existing factory in Nanjing, China to enable smart manufacturing capabilities for the rapid deployment of 5G equipment in the communist nation. This includes the first modular-designed automatic assembly line for 5G radios, which will enable the company to produce the latest 5G radios for the Chinese market. Moreover, Ericsson has modernized 5G testing equipment to be more efficient and flexible across the product portfolio.

Ericsson continues to focus on 5G system development and has undertaken several initiatives to position itself for market leadership. The growth in 5G subscriptions is estimated to be the fastest in North America with 63% of projected mobile subscriptions within the next five years, followed by North East Asia with 47% and Europe with 40%.

As 5G devices increasingly become available and more 5G networks go live, above 10 million 5G subscriptions are estimated globally by the end of 2019. Ericsson has been working with operators to help in their network modernization, while optimizing opportunities.

Despite the inherent growth potential, Ericsson’s shares have lost 7.7% against the industry’s growth of 17.4% year to date. Favorable industry trends are likely to boost its long-term growth and profitability. The company intends to accelerate its planned cost cuts and efficiency measures.

Ericsson currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are PCTEL, Inc. PCTI, Nokia Corp. NOK and Viasat, Inc. VSAT. While PCTEL sports a Zacks Rank #1 (Strong Buy), Nokia and Viasat carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

PCTEL surpassed earnings estimates in each of the trailing four quarters, the average surprise being 110.4%.

Nokia surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 89.3%.

Viasat surpassed earnings estimates in each of the trailing four quarters, the average surprise being 59.4%.

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