Protectionism can work. Ericsson US 5G radio

Kyle Malady with Ericsson radio 230

Kyle Malady of Verizon is holding the first Ericsson 5G radio built in the U.S. It’s interesting to see the size and weight of the unit. Kyle is neither a giant nor a champion weightlifter; today’s base stations just aren’t that big. 

Verizon ordered over 10,000 of them, as have AT&T and T-Mobile. That wasn’t enough to persuade Ericsson to manufacture domestically, especially since the Chinese are buying 100,000 from Ericsson.

But DC came in, imposed a tariff, and put numerous non-tariff obstacles in front of Ericsson. Nokia and Ericsson lobbyists were laugh out loud silly when they attacked Huawei on 5G, given that both did primary 5G manufacturing in China.

Protectionism has disadvantages. By definition, it reduces competition in the short run, raising prices and hindering innovation. Economic orthodoxy has long been that “free trade” is always best, but Nobelists Joseph Stiglitz and Paul Krugman use empirical data to rip apart the theory.

Apple has just started making its high-end models in India because of tariffs. America has 7 of the top 10 Internet companies. It would probably have 10 out of 10 if China hadn’t protected its companies. India, Germany, and France are now pressing for “digital sovereignty.”   

“From as early as 1790 Andrew Hamilton in the United States counterpoised the ‘infant industry’ argument which pointed out that newly developing industries have higher costs until they gain ‘economies of scale’ and thus, need protection. Indeed from 1816 to 1945 the tariffs protecting US industry were some of the highest in the world,” Brian Davey writes.

Tariff often do protect inefficient industries and result in higher costs. But a dynamic theory of growth believes those inefficiencies (and tariffs) can be reduced over time. 

Put another way, Nigeria and Indonesia pay a heavy price if 20-30% of taxi fares and hotel bills are siphoned to California. Both countries, as well as India, Russia, and Brazil, are large enough to expect domestic alternatives would quickly develop if they blocked Uber and AirBNB.

Protectionism is probably a mistake if the result is continuing overpriced local goods. It’s often right if the protected industries can grow and become internationally competitive.

BIllions and probably tens of billions every year are going to US Internet giants. In some cases, the returns are earned and a good deal for both sides. In others, the flow is primarily driven by the market power of the giants. 

Each case has to be examined rather than judged by outdated economic “principles.”

 

Ericsson delivers first U.S. manufactured commercial 5G base station to Verizon

Kyle Malady, Chief Technology Officer of Verizon, receives the first U.S. manufactured commercial 5G base station from Ericsson’s new state-of-the-art smart factory in Texas.
Verizon (NYSE, Nasdaq: VZ) is the first recipient of a U.S. manufactured commercial 5G base station from Ericsson’s (NASDAQ: ERIC) new state-of-the-art smart factory in Texas. The equipment is the first 5G base station produced by Ericsson in the U.S. and marks another significant milestone as Ericsson continues to strengthen its U.S. capabilities in 5G research, design, manufacturing and service delivery.

“Ericsson’s smart factory is a cornerstone of our collaboration as we work together to bring 5G to our consumer, enterprise and public safety customers,” said Kyle Malady, Chief Technology Officer of Verizon. “Together these types of innovation will accelerate our 5G deployments, as we expand our 5G leadership in technology and continue to rapidly build the ecosystem with our partners.”

The 5G base station delivered to Verizon is the millimeter-wave Street Macro solution, which is key to Ericsson’s 5G portfolio for its North American customers. All radio access components are housed in one lightweight enclosure, allowing for the rapid growth of 5G coverage in complex city environments.

Fredrik Jejdling, Executive Vice President and Head of Networks, Ericsson, says: “As the most advanced platform for innovation, 5G will enable a transformation across enterprises –as we’re now experiencing in our own smart factories. Automation and remote operations have become more important, and we’re working with our customers to make them available for the benefit of industries. From producing the first 5G base stations at our 5G USA Smart Factory earlier this year, we’ve made our first commercial delivery to Verizon. That’s just the beginning.”

The delivery, captured in this short video, was made in adherence with The Centers for Disease Control and Prevention guidelines for social distancing due to COVID-19, ensuring the exchange was contract-free.

The 300,000 sq. ft. factory, the first of its kind in the U.S., began commercial operations in March and will be fully operational by the end of the year. It produces 5G and Advanced Antenna System radios to boost network capacity, and the facility itself is outfitted with fast and secure 5G connectivity to enable agile operations and flexible production.

5G’s low latency, speed and high bandwidth helps to create the factory of the future, enhancing capabilities like machine learning, augmented reality and virtual reality (AR/VR). Factories powered by 5G dramatically impact data collection, allowing for real-time monitoring of inventory, maintenance needs, higher flexibility and shorter lead times for factory floor production reconfiguration, layout changes and other alterations.

This domestic manufacturing factory is a critical component of Ericsson’s global supply strategy, bringing manufacturing capabilities to the U.S. as the company works to meet the demand for 5G deployment by bringing the supply chain closer to customers.

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