The CFO said he expected a 1% impact from tariffs on Ericsson's margins in Q2
The CEO said they needed to build a "Western ecosystem" for components
But is that even possible?
Everyone on Ericsson's first quarter earnings call this morning wanted to know how the Trump tariffs would affect Ericsson’s business.
CFO Lars Sandström said that the company was expecting a 1% impact on its margins from the U.S. tariffs in the second quarter. Both he and CEO Börje Ekholm, however, said that the geopolitical situation was fluid and they couldn’t predict exactly how the situation might change.
“We just wanted to make sure that we give our best estimate [of] where we stand now,” Sandström said during the Q&A portion of the call.
Changing the production mix
Ericsson said that it has production facilities in the U.S., South America, Europe and parts of Asia. “We can shift volumes between sites, but it’s not a quick process,” noted Sandström.
None of this, in fact, will be a quick process, as Ekholm said. “We probably need to be a bit more active in building a Western ecosystem,” he commented. “That’s going to take some time.”
Ericsson – like every manufacturer – uses components made in China in its products, and it’s not clear how it would actually get components made in a Western ecosystem.
The Q1 numbers
The telecom infrastructure vendor reported net sales of SEK 55 billion ($5.6 billion) for the quarter, up from SEK 53.3 billion for the same quarter last year. This was driven by strong North American sales, while sales declined in other areas. Ericsson posted a 61% increase in annual net income for the quarter.