5G underdog Nokia firmly back in game

The Finnish firm was considered a 5G underdog after it betted on the wrong type of chips and then lost out on a multibillion-dollar Verizon contract to Samsung. Yet under the new CEO, Pekka Lundmark, it has recently been gaining ground on arch rival Eriscsson, after US pressure on European governments to crack down on Huawei.

Two good quarters have now rekindled hopes of a turnaround. Analyst at PP Foresight, Paolo Pescatore, said the misfortune of others and the focus on key products have helped reignite opportunities for the business.

Reefshark chipset

Nokia has also invested significantly in its Reefshark chipset, which has cut the end cost of its 5G equipment and given its business units more autonomy over where they choose to compete.

European governments have long been tightening controls on the role of Chinese companies in 5G networks following diplomatic pressure from Washington. While both Nokia and Ericsson have gained customers that might have gone to Huawei, Ericsson had been faring better with big contract wins in China. But Ericsson’s China arm has taken a hit since Sweden also banned the country’s companies from supplying critical 5G equipment.

In a second phase of its 5G deployment by China Mobile last week, Ericsson’s 5G radio share dropped from more than 11% to about 2%. Nokia is also expected to win a portion of upcoming contracts from China Unicom and China Telecom at the expense of Ericsson.Nokia’s shares have gained in the region of 30% in the last year, while Ericsson’s are up just 2% over the same period. 

Open approach

However, While Nokia, Ericsson and Huawei are currently the only companies providing complete 5G wireless networks, the US government is now touting a more open approach, allowing mobile operators to mix and match equipment from various suppliers, so potentially securing US companies bigger shares of the market.

China, however, is way ahead of other countries for deployment, reflected in the fact that the China Mobile contract for about 500 000 base stations was for more than all the 5G base stations currently in Europe.

Additionally, some analysts caution that being in China could drag on Nokia’s margins and any new geopolitical tussles could lead to significant losses. Kimmo Stenvall, an analyst at OP Markets, also said that Nokia’s updated outlook would likely take into account the global chip shortage with not enough semiconductors to go around.