Ericsson, the Swedish telecom-equipment maker, had bet on a boom in 5G spending. As mobile operators around the world rolled out 5G networks, Ericsson expected years of strong demand for its radio equipment, and it built up its workforce and capacity accordingly.
The boom did not arrive as expected. By late 2022 the telecom-equipment market was weakening: 5G spending in key markets slowed, and demand did not materialize at the pace Ericsson had forecast. The company was left with more capacity than the market needed.
In February 2023 Ericsson announced it would cut about 8,500 jobs, roughly 8 percent of its 105,529 employees, including about 1,400 in Sweden. The layoffs were part of a cost-cutting plan targeting roughly $860 million in savings, with most cuts taking effect in the first half of 2023 and some extending into 2024.
The case was about forecasting. Ericsson had staffed for a 5G surge that stalled, and when the expected demand failed to show, the workforce it had built became overcapacity. The 8,500 jobs were the bill for hiring against a forecast rather than a market — a reminder that capacity built for a boom is the first thing cut when the boom does not come.
Cut 8,500 jobs, about 8% of staff, to save roughly $860 million — the bill for hiring to a forecast that did not hold.
Ericsson built up its workforce and capacity for a 5G spending boom that did not materialize at the pace it had forecast
When the telecom-equipment market weakened and 5G demand slowed, the company was left with more capacity than the market needed
The 8,500 job cuts, about 8 percent of staff, were the cost of hiring against a forecast that did not hold rather than against actual demand
A workforce built for a boom is the first thing cut when the boom fails to arrive; the layoffs were the correction to over-capacity
Capacity built for a boom becomes overcapacity when the boom fails to arrive. Ericsson staffed for a 5G surge that never came; 8,500 jobs cut were the bill for hiring to a forecast, not a market.
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