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Ericsson to Build Smart Factory in US, Eyes Global Expansion

Zacks Equity Research

Ericsson ERIC has announced plans of building its first fully automated smart factory in the United States. The Swedish telecom equipment maker has been focusing on working more closely with its customers to support them in the build out of 5G globally, particularly in North America.

While the location will be announced upon final discussions with state and local authorities, the company’s new factory, planned to initially employ about 100 people, is expected to be operational in early 2020. In addition, Ericsson is digitizing its entire global production landscape.

Notably, the avant-garde facility will likely produce Advanced Antenna System radios to increase network capacity and coverage. This includes rural coverage and 5G radios for urban areas, required for rapid 5G deployments in North America.

Ericsson continues to focus on 5G system development and has undertaken many notable endeavors 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%.

Reportedly, the factory will be powered by Ericsson 5G solutions customized for the industrial environment and will advance the company’s commitment to sustainability, including registration to pursue Leadership in Energy and Environmental Design Gold Certification.

Robust commitment of chipset and device suppliers is the key to the acceleration of 5G adoption. Smartphones for all main spectrum bands are scheduled to hit the market this year. As 5G devices increasingly become available and more 5G networks go live, more than 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 on plenty of opportunities.

Further, the factory complements Ericsson’s global supply chain, allowing it to work closely with customers through its European, Asian and American operations, while ensuring fast deliveries to meet customer needs. The company is also accelerating the launch of cutting-edge smart manufacturing through a flexible production setup in its existing factories in Estonia, China and Brazil.

Favorable industry trends are likely to boost the company’s long-term growth and profitability. Ericsson intends to accelerate its planned cost cuts and efficiency measures. It also remains focused on its core business of selling networking equipment with the expected ramp up of 5G networks.

Driven by diligent execution of key business strategies, shares of Ericsson have rallied 27.1% compared with the industry’s rise of 15.8% in the past year.



Currently, Ericsson has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Harris Corp. HRS, Motorola Solutions, Inc. MSI and Ubiquiti Networks, Inc. UBNT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Harris has long-term earnings growth expectation of 8%.

Motorola has long-term earnings growth expectation of 7.7%.

Ubiquiti has long-term earnings growth expectation of 19.8%.

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