The Great Divide
Throughout 2024, we have seen how global trade, which is crucial for Sweden, has changed character and become increasingly politicized. At this point, it is still unclear what the consequences of the new U.S. administration will be, who will be affected or benefit, and in what way, but Swedish industry will inevitably be impacted.
A jolt out of passivity for Europe?
The EU has long been aware that there would be consequences once the new administration began to act. Low European growth, especially in Germany and France, is a growing concern, and the region has lost competitiveness. The shift in U.S. leadership may serve to unite Europe and act as a jolt out of its current passivity.
In early autumn 2024, Mario Draghi published a report highlighting the urgent state of European competitiveness. Analyses by McKinsey, among others, show that European companies invest significantly less in capex and R&D than their American counterparts. In 2022, European companies invested 4.6 percent of GDP in capex and R&D, while large U.S. companies invested 6.7 percent. The gap has widened considerably. In 2010, the figures were 4.4 percent and 4.8 percent respectively (McKinsey Global Institute, “Investment: Taking the Pulse of European Competitiveness”).
For companies like Nokia and Ericsson, it is clear that R&D and innovation investment in Europe must increase in order for the region to remain competitive with the U.S. and China. To highlight this, they jointly organized a summit with other European tech companies to bring attention to Europe's competitive position. They emphasized that in addition to increased investment in advanced networks, simpler regulation and market consolidation are needed to strengthen telecom operators and help them scale. Both companies are clear that their focus is on investing in R&D to achieve technological leadership.
Nokia and Ericsson have long noted that Europe has had a competitive advantage in mobile networks, but this advantage is shrinking. Political action is needed to protect the position. Rapidly accelerating investment in next-generation networks in Europe, similar to developments in the U.S., is critical from both an economic and security perspective. That these two competitors are cooperating in a joint tech initiative reflects the seriousness of the current state of European innovation and the urgent need to boost investment and avoid falling further behind. It also reflects how important it is for these suppliers to reignite momentum in their European home markets.
Tech companies are repositioning
There are few large European tech companies. Europe’s innovation capacity has weakened over the past 20 years, while the U.S. dominates, led by the so-called Magnificent Seven: Microsoft, Amazon, Meta, Alphabet, Apple, Nvidia, and Tesla. For these companies, gaining Trump’s favor during his presidency is key, as the market has shifted, new regulations are in place, and growth has become more difficult.
Many of these companies’ owners and executives were visibly present at Trump’s inauguration. In addition to direct and indirect donations through super PACs like MAGA, they began to adjust to the new political order in the fall. Companies that were previously vocal on diversity, inclusion, and gender equality are now reassessing their approach and adapting to the new climate. We can only hope that investors do not follow the same trend.
To further secure their interests, many companies made what may seem like a simple gesture – donations to the inauguration committee. This is a routine practice for many U.S. corporations, although from a European perspective, it raises ethical concerns.
Ericsson in the U.S.
Ericsson is a European company, not one of the American tech giants, but according to media reports, it donated SEK 5.5 million to the inauguration committee. The company’s motivation: “The donation reflects our growing commitment to the United States at a critical moment in the journey toward a fully digital economy.”
Given the Trump administration’s tech agenda, including a major AI initiative of at least 100 billion U.S. dollars, Ericsson is working to safeguard its position by emphasizing its role as a provider of secure networks. In 2024, Ericsson and AT&T began deploying the operator’s Open RAN network, a five-year agreement estimated at 14 billion U.S. dollars. Production for the American market takes place in Ericsson’s high-tech 5G Smart Factory in Texas, where the company has invested more than 150 million U.S. dollars and hired over 500 people. But of course, more is always desired.
For Ericsson, this expansion of open network architecture is critical to the company’s growth, profitability, and valuation. The company remains highly dependent on North America as long as investment in Europe continues to lag. The fourth quarter report speaks for itself – 54 percent organic growth in North America, while Europe remains stable. North America is currently Ericsson’s main growth engine, even as the mobile infrastructure market begins to stabilize.
Amid all of this, it is becoming increasingly important from a European perspective to invest not only in innovation but also in the region’s role in sustainable business and technology. Declarations are no longer enough – now it is time to deliver. Europe must not become marginalized, but instead be perceived as an attractive home market in the long term, including by its own technology providers.
