While much of the technology world remains captivated by the rapid advancements in artificial intelligence, the telecommunications sector is grappling with a far more sobering reality that stands in stark contrast to the industry’s usual optimism. The severe downturn in the global 5G market has moved beyond abstract financial forecasts and is now manifesting in deeply concerning ways, most notably through the substantial and ongoing workforce reductions at Ericsson and Nokia. These are not merely routine corporate efficiency measures; they are alarming symptoms of a contracting market that is forcing the two leading Western telecom equipment vendors to question their long-term strategies, profitability, and very ability to compete in an increasingly challenging landscape. The struggles of these Nordic giants underscore a fundamental crisis, prompting a reevaluation of the 5G promise and the sustainability of the companies building its backbone.
The Anatomy of a Market Collapse
The Human Cost of a Shrinking Market
The massive scale of the layoffs at both Ericsson and Nokia serves as the most direct and human evidence of the deep-seated malaise affecting the 5G infrastructure market. These workforce reductions are not minor adjustments but represent a fundamental realignment in the face of dwindling demand. Ericsson, for instance, has been compelled to reduce its global workforce by over 15,600 employees—roughly 15% of its total staff—since the start of 2023. This move is part of a broader trend of continuous downsizing that extends far beyond the factory floor, reflecting the unsustainability of its previous operational scale. The situation at Nokia is even more severe; the company’s workforce has shrunk by nearly 27,500 people, or 27%, between 2018 and the end of 2023, with thousands more cuts announced for the near future. This relentless cycle of job cuts highlights a grim reality where even industry leaders are forced into drastic measures to stay afloat in a market that has fundamentally contracted.
The primary driver behind these financial pressures and subsequent workforce reductions is the precipitous slowdown in the Radio Access Network (RAN) market, which constitutes the largest portion of 5G infrastructure expenditure. According to industry data, global spending on essential RAN products experienced a significant decline, falling from a peak of $45 billion in 2022 to just $35 billion in 2023. While some analysts suggest the worst of the decline may have passed, the outlook for a substantial recovery remains bleak. Current forecasts project, at best, low-single-digit growth in the coming years, indicating that the current slump is not a temporary dip but a new, more constrained market reality. This prolonged stagnation places immense pressure on vendors like Ericsson and Nokia, whose business models and revenue streams are heavily reliant on carrier investment in network expansion and upgrades, forcing them to navigate a landscape with far fewer opportunities for growth than was anticipated just a few years ago.
Ericsson’s Double-Edged Sword
Ericsson’s current predicament is uniquely paradoxical, as its strategic successes have inadvertently deepened its vulnerability to the market downturn. Under the leadership of CEO Börje Ekholm, the company executed a disciplined strategy to streamline its operations, shedding non-core assets to focus intensely on its primary network business. This approach initially yielded significant dividends, allowing Ericsson to capitalize on geopolitical shifts and increase its RAN market share outside of China from 33% in 2017 to an impressive 39% by 2022. This market share growth was bolstered by major contract wins, most notably a landmark deal with AT&T in the United States, which solidified its position as a dominant force in Western markets. However, this very focus has become a double-edged sword. With approximately 64% of its total revenue now directly derived from the stagnating RAN market, Ericsson finds itself disproportionately exposed to the sector’s decline—a vulnerability compounded by external pressures like U.S. tariffs that inflate its operational costs.
A particularly concerning development is the impact of aggressive cost-cutting measures on Ericsson’s Research and Development budget, an area historically protected to maintain its technological leadership. For years, the company’s R&D investment, centered in Sweden, grew substantially, rising from SEK 37.9 billion in 2017 to SEK 53.5 billion in 2023. However, this trend has reversed, with R&D spending falling by 10% in the first nine months of 2024. While leadership attributes this reduction to eliminating redundancies after relocating some R&D resources, it raises critical questions about the company’s long-term innovation strategy. Specifically, the continued heavy investment in custom silicon (ASICs) for traditional baseband equipment appears to conflict with its simultaneous championing of cloud RAN, a technology reliant on general-purpose processors from vendors like Intel. Maintaining two separate and costly development tracks—one for specialized hardware and another for cloud-based software—seems financially inefficient in a shrinking market, casting doubt on the coherence of its future technological roadmap.
Nokia’s Uphill Battle and the Shadow of Huawei
A Troubled Turnaround
Nokia’s situation is portrayed as even more precarious, as the company’s significant efforts to engineer a technological turnaround have unfortunately coincided with the severe market slump, neutralizing potential gains. After early blunders in the 5G race, Nokia worked diligently to enhance its product portfolio and regain its competitive footing. Despite these technological strides, its mobile networks business group remains the company’s “problem child.” During the first nine months of 2024, this critical division recorded a notable operating loss of €64 million on sales of €5.3 billion, a clear and worrying indication of its ongoing financial distress. This unprofitability at the core of its business demonstrates that technological parity alone is insufficient to overcome the brutal market realities. The timing could not have been worse, with the sharp decline in operator spending effectively wiping out the benefits of Nokia’s hard-won recovery and leaving it in a persistently challenging position.
In response to these persistent struggles, Nokia has embarked on a comprehensive restructuring effort designed to shore up its finances and streamline operations, though this does not solve the underlying business challenges. Instead of significantly increasing its overall R&D budget since 2017, the company has focused on making “shrewder” investments. A key element of this strategy is a reported $1 billion investment from Nvidia aimed at developing network software for general-purpose GPUs, signaling a strategic shift away from proprietary hardware. Furthermore, the company is reorganizing by merging the unprofitable mobile networks unit with the more stable and profitable core network and licensing businesses. From a purely accounting perspective, this move will obscure or eliminate the mobile division’s reported losses on the balance sheet. However, this financial maneuvering does little to address the fundamental lack of demand and intense pricing pressure in the RAN market. This challenge is further underscored by Nokia’s lagging productivity, with revenues per employee rising less than 8% between 2017 and 2023, a stark contrast to Ericsson’s 29% increase over the same period.
The Looming Competitor
The financial and operational difficulties faced by Ericsson and Nokia are thrown into sharp relief when contrasted with the remarkable resilience and continued growth of their chief Chinese competitor, Huawei. Despite being effectively banned from several key Western markets and contending with severe U.S. sanctions that restrict its access to advanced semiconductor technology, Huawei has not only survived but thrived. Between 2017 and 2023, the company expanded its global workforce by an impressive 28,000 employees, bringing its total to 208,000. More tellingly, its revenues in 2023 were nearing the record levels it achieved in 2020, before the full impact of the U.S. sanctions was felt. This performance stands as a testament to its massive domestic market, diversified business portfolio, and substantial state support, allowing it to weather the global RAN market downturn far more effectively than its Nordic rivals.
This stark divergence between the fortunes of the Western vendors and Huawei presents a major strategic concern for telecom service providers in countries that have committed to excluding Chinese equipment from their networks. The deteriorating financial health of their primary alternative suppliers, Ericsson and Nokia, creates an increasingly fragile and less competitive ecosystem. The continuous downsizing and financial instability of these two companies raise anxieties about the long-term cost, pace of innovation, and security of Western telecommunications infrastructure. The situation ultimately leaves operators in a precarious position, dependent on a shrinking pool of vendors who are themselves struggling to remain profitable—a scenario that poses significant risks for the future development and reliability of critical 5G networks.
