Ericsson shifts more R&D to Silicon Valley May 29 2014

Despite calling for higher investment in European 5G programs, Ericsson building new campus to tap into California's innovation

By Caroline Gabriel

In the same week that Ericsson's CTO called for greater R&D spend in Europe, to restore the region's leadership in wireless technology, the Swedish giant has increased its investment in its Silicon Valley R&D campus.

Ulf Ewaldsson echoed industry demands for a stronger '5G' agenda and higher funding from the public sector in Europe, claiming the next generation of mobile technology is being driven by the US. Last week, the European Commission announced measures to encourage R&D spending by private firms, and it claimed that "lower levels of private investment", not public sector failings, were to blame for falling behind the US and Japan.

Ericsson, which has been tapping into Silicon Valley's massive R&D ecosystem for years, will not be sending out the signals the EC wants. It faces the dilemmas shared with other European majors. It still spends 60% of its $5bn R&D budget in its home region, but Europe accounts for a falling share of its revenues, and it needs to harness the innovation hubs, start-ups, skills and financing available in areas in the vanguard of key technologies.

Silicon Valley has become increasingly important to telecoms firms as IT has converged with networking, and firms like Ericsson have needed to add software and data center skills to their portfolios. The company set up an R&D center in the area in 2009, expanding its presence there to focus on mobile broadband and converged IP-based products. At the time, head of networks Johan Wibergh said: "The reason we are Silicon Valley is the availability of IP. The engineers in the Valley live and breathe it every day."

Now Ericsson is steadily increasing its investment in the California hub and is building a new campus in Santa Clara which will bring together about 2,000 R&D staff in the areas of IP, TV and media, software defined networking and "mobile innovation" - all key to the company's future growth plans. Some key executives and projects will relocate to the area, including the Ericsson OpenDaylight and Smartphone Labs.

Per Borgklint, head of business unit support solutions, set out the agenda, saying: "Ericsson's new campus unites our rapidly expanding Silicon Valley workforce and creates an environment that will inspire our employees and customers. Together with our customers and partners, Ericsson is driving IP, TV and media innovation, and accelerating development of the media enabled, interoperable and programmable network of tomorrow."

"Ericsson's expansion in Silicon Valley has grown in tandem with the region's increasing gravitational pull on the technology sector," added chief human resources officer Bina Chaurasia. "Our company has a growing need for software engineers and employees with a technology savvy skill set who can partner, create, learn, sustain and innovate; helping us move toward what Ericsson calls the 'Networked Society'."

Such sentiments will not encourage the EC in its bid to put Europe back in the forefront of mobile data technologies. Ewaldsson, in his recent comments, said the firm is seeing diminishing returns from R&D in its home region because of weak public sector investment. He told the Financial Times that this is opening the way for other parts of the world to lead in next generation telecoms. He pledged to "create a bigger agenda in Europe" by releasing information about the level of financial investment and returns it makes there.

 "North America is driving LTE and new networks rather than Europe. We can do three to four years ahead, but the public sector needs a longer term vision," he said.

 The EC is in the process of changing regulations under which member states can grant government aid to companies for R&D&I (research, development and innovation), with a goal of increasing this spend to 3% of European GDP. The EC blamed "lower levels of private investment" for Europe's lack of 5G leadership but operators point to over-competitive markets, rigid M&A processes and EC regulations in areas like roaming fees, claiming these factors limit carriers' ability to invest in new technologies, compared to peers in the US, Japan and China.