Nearly twenty percent of Ericsson’s Swedish workforce is to be laid off as it struggles to compete with cheaper Chinese firms.

3,000 positions will be cut - 1,000 in production, 800 in research and development (R&D) and 1,200 in other operations - through a combination of voluntary and forced reductions. The number of consultants in Sweden will also drop by 900, and the company will take other, unspecified, cost cutting measures.

Moving away from European hardware production

Borås, Göteborg, Karlskrona, Kumla, Linköping and Stockholm will all lose staff, with Borås and Kumla in particular seeing “significant reductions.”

The company expects to conclude the majority of reductions during the first quarter of 2017, with Borås and Kumla concluded during the second half of 2017.

Borås and Kumla are the locations of Ericsson’s last remaining Swedish production facilities, where it prototyped products before release. But, with most of the company’s manufacturing moving to cheaper locations like China and Estonia, Ericsson believes it can cut costs by continuing that trend.

The Borås plant may be sold, should a buyer emerge.

“Ericsson is going through a large transformation,” Jan Frykhammar, President and CEO of Ericsson, said. 

“We continue to have a strong focus on R&D, and since many years, most Ericsson employees work in software development and services, rather than hardware production. The measures are necessary to secure Ericsson’s long term competitiveness as well as technology and services leadership.”

Ericsson has seen stiff competition from China’s Huawei, which has rapidly expanded across Europe. Nokia’s acquisition of Alcatel Lucent has also added to the company’s troubles.

“The industry we’re operating in is undergoing a very fast change. If the speed of change in the industry accelerates further, we’ll need more transformation,” Frykhammar told The Wall Street Journal.

Ericsson hopes that 5G, IoT and cloud computing will help it grow once again, but business has been slow to find traction, with 5G in particular still several years away.

The company, however, is adamant that the staff cuts do not mean it will decrease its R&D investment. Ulf Ewaldsson, Chief Strategy and CTO said: “We have a clear goal that our R&D in Sweden should be world leading, not least in next generation systems.

“In the short term we have to reduce the number of positions in R&D, primarily within administrative roles. At the same time our intention is to bring in new competence in new technologies. Therefore, we intend to recruit approximately 1,000 engineers in Sweden, primarily from universities, over the coming three years.”