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CONFIDENTIALMobileHandsetCompetitorAnalysis:EricssonSAMSUNGELECTRONICSCHINA(SECChina)August20,2001Thisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.SAMSUNG010605BJ-kickoff2CONFIDENTIALMobileHandsetComOVERVIEWOFCOMPETITORANALYSISFRAMEWORK1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff21OVERVIEWOFCOMPETITORANALYSIKEYISSUESTOPROBE-ERICSSONStrategyProduct/marketValuechainstrategyOrganization&ownershipFinancialperformanceWhatwillbeEricsson’sstrategicfocusforthenext5years?HowwillEricssonsecureitsleadingpositioninmobileinfrastructure?WhatproductswillEricssonbefocusingon?WhichmarketsegmentwillEricssonbeinterestedin?WillEricssonbecomeanichemarketplayerinmobilehandset?HowdoesEricssonsecureitsleadershipintechnology?HowdoesEricssonimproveitslocalproductioncapability?HowareEricsson’smobilehandsetsdistributed?HowdoesEricssonorganizeitsJVsandWOFEs?WhatfunctionsdoesEricssonChinacentralize?HowgoodisEricsson’srecentfinancialperformance?HowwillEricssonimproveitsperformanceinthefuture?SAMSUNG010605BJ-kickoff22KEYISSUESTOPROBE-ERICSSONBACKGROUNDINFORMATION1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff23BACKGROUNDINFORMATION1.BackgERICSSONISATECHNOLOGYLEADERINMOBILECOMMUNICATIONANDAMARKETLEADERINMOBILEINFRASTRUCTUREImplicationLeaderinmobilesystemtechnologyincludingGSM,GPRSand3GEmphasizeonmobileinfrastructureandclaimtobetheonlytotalsolutionproviderforafullrangeof2Gand3GstandardsLocationBasedatSweden,with24officesinChinaSince1998,ChinahasbeenEricsson'slargest

marketintheworldInvestmentInvestedmorethanUSD0.6billioninChinaBusinessFourmainbusinessunits:Mobileinfrastructure,mobilehandset,datanetworkandcircuitswitching/packetswitchingmulti-servicenetworksStartingFirstofficeinChinain1985,firstJVinChinain1992Employees100,000staffin140countriesOver4,000employeesinChina24offices,10JVsand4WOFEsHistory1985:FirstEricssonofficeinBeijing1987:FirstmobilenetworklaunchedQinhuangisland1989:SetupofficesinGuangzhouandShanghai1992:StartedJVsinChinaformobileinfrastructureandhandset1994:EstablishedEricssonChinaLimited1995:ChinabecameEricsson'sthirdlargestmarketintheworld1996:ChinabecameEricsson'sssecondlargestmarketintheworld1997:EstablishedR&DcenterinShanghaiandEricssonChinainstitute1998:ChinabecameEricsson'slargestmarketintheworld,establishedChongqingEricssontechnology1999:EstablishedEricssonconsultinginShanghaiandmobilemulti-medialabin

Zhonguancun2000:FirsttocompleteWCDMAtestinChinaBackgroundSAMSUNG010605BJ-kickoff24ERICSSONISATECHNOLOGYLEADESTRATEGY1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff25STRATEGY1.BackgroundinformatERICSSONAIMSTOSECUREITSLEADERSHIPPOSITIONINNETWORKEQUIPMENTANDMAYBECOMEANICHEPLAYERINMOBILEHANDSETProductMaintainfootholdinthelowendmobilehandsetmarketthroughJVwithNanjingPandaDevelop3Gtechnology(WCDMA)formobilecommunicationbycollaboratingwithMIIandDoCoMo,andapplyleadingtechnologytoproductsSecureitsleadershippositioninnetworkequipmentratherthanbecomingthebest-sellingbrandformobilehandsetsValuedeliverysystemR&DlocalizationthroughcollaborationwithChinesegovernmentanduniversitiesFurtherexpandlocalproductioncapacityCentralizemarketingfunctionsunderEricssonChinaDistributethough5first-tierresellersincludingPTACandPTICBuildsconsumerwebsiteforEricssonhandsetusersVisionToinnovateinmobilenetworkandinternetconvergenceandtoleadintheeraofmobileinternetStrategySource:Ericssonpressrelease,DresdnerKleinwort,McKinseyanalysisSAMSUNG010605BJ-kickoff26ERICSSONAIMSTOSECUREITSLEERICSSON’sMARKETSHAREISDECREASINGOVERTHEPASTFEWYEARSMonthlymarketsharedevelopment(Percentofmarketinunitssold)9899Jan‘00Dec‘00NokiaMotorolaSiemensEricssonSource:RetailAuditSource:IDC,McKinseyAnalysisSAMSUNG010605BJ-kickoff27ERICSSON’sMARKETSHAREISDECERICSSONISNOWNUMBERFOURINSALESVOLUMEANDNUMBERFIVEINREVENUEINTHEMOBILEHANDSETMARKETOthersSiemensEricssonMotorola199920012000SamsungNokiaBreakdownofsalesbybrandeachyearPercentSource: GfK,IDC,McKinseyanalysisOthersSiemensEricssonMotorola199920012000SamsungNokiaBreakdownofunitssoldbybrandeachyearPercentSAMSUNG010605BJ-kickoff28ERICSSONISNOWNUMBERFOURINPRODUCT/MARKET1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff29PRODUCT/MARKET1.BackgroundinEricssonclaimstobetheonlytotalsolutionproviderinmobilecommunicationwhooffersafullrangeof2Gand3Gstandards.Tosecureitsleadershippositioninmobileinfrastructure,EricssonmaybecomeanichemarketplayerinmobilehandsetsEricssonisatechnologyleaderinmobilecommunication,whichisreflectedinitsearlyreleasesofWAP,GPRSandbluetoothhandsetsand3GnetworksEricssongivesupthehigh-endmarketinmobilehandsettofocusonlow-end.Itisrelativelystrongin1sttiercities,andtheNorthandEastChinaKEYMESSAGES-PRODUCT/MARKETSAMSUNG010605BJ-kickoff210EricssonclaimstobetheonlyERICSSONOFFERSTOTALSOLUTIONSINMOBILECOMMUNICATIONWITHMOREEMPHASISONMOBILEINFRASTRUCTUREProductsNowandfutureEricsson

mobilehandsetEricsson

product

offeringsEricssonnetworkFirstWAPhandsetintheworld(MC218)R320scWAPhandsetwithChineseinterfaceA2638scforyoungandsuccessfulT29scformobileprofessionalR380scforbusinesseliteT20sc,A2618scforyoungandfashionableGSMandUMTSmobileinfrastructureincluding

GSM,DCS1800,CDMAandWCDMADatanetwork,e.g.AXD301ATMswitchAXI540IProuter,andIPphoneFirstGPRShandsetandfirstbluetoothhandset(T36)FirsttoprovideGSM1800/

1900networkssimultaneouslyLeaderinWAPLeaderinGPRSTotalsolutionsin3GbasedonWCDMA,CDMA2000andEDGESource:EricssonpressreleaseSAMSUNG010605BJ-kickoff211ERICSSONOFFERSTOTALSOLUTIONERICSSONMAINTAINSFOOTHOLDINTHELOWENDMARKETHigh

(>RMB3,500)Source: Sino-MR(Jan2001–Feb2001),CCIDBreakdownofunitsoldbybrandforeachpricepoint

PercentHigh-mid

(RMB2,500-3,500)Mid

(RMB2,000-2,500)Mid-Low

(RMB1,500-2,000)Low(<RMB1,500)OthersSiemensEricssonMotorolaSamsungNokia9%15%7%Unitsas%oftotal26%43%7SAMSUNG010605BJ-kickoff212ERICSSONMAINTAINSFOOTHOLDINTier1Tier2Tier3Tier4NokiaMotorolaOthersERICSSONMATCHESSIEMENSINTHE1stTIERCITYMARKETPercentmarketshare,2000EricssonSiemens18%19%23%40%Tiersizeas%oftotal100%=Millionunits

6.77.08.514.8Source:McKinseyAnalysisSAMSUNG010605BJ-kickoff213Tier1Tier2Tier3Tier4NokiaMERICSSONISRELATIVELYSTRONGINNORTHANDEASTMarketsharebybrandspergeographicarea,2001PercentMarketsharebygeographicareaPercentEastSiemensEricssonSamsungOthersNokiaMotorolaWestNorthNorth-eastSouth3013151311Central18Source:GfK,McKinseyAnalysisSAMSUNG010605BJ-kickoff214ERICSSONISRELATIVELYSTRONGVALUECHAINSTRATEGY1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff215VALUECHAINSTRATEGY1.BackgroForcoreproductssuchasmobileorfixedlineinfrastructure,Ericssonhascentralizedthesalesforcestoprovide“oneface”tocustomers;forsmallerproductssuchasmobilehandsets,EricssonsellsthroughJVsanddistributorsEricssonusesPTAC,PTIC,Stellar,508,andtheUnitedFirstasits5first-tierresellers.Insufficientsupportprovidedbyresellerslimittheabilityofitsdealerandchannelstoprovidepre-andafter-salessupporttocustomers,whichgreatlyafftectEricsson’spositionintheChinamarketKEYMESSAGES-VALUECHAINSTRATEGYSAMSUNG010605BJ-kickoff216ForcoreproductssuchasmobiERICSSONPRESENTS"ONEFACE"TOCUSTOMERSBYCENTRALIZINGCOREPRODUCTSALESTHROUGHITSOWNSALESFORCER&DManufacturingMarketingSalesServiceNetworkMobileinfra-

structureShanghaiR&DcentreNanjingEricssonBeijingEricssonTelecomSystemEricssonChinaEricssonChinaDalianEricssonGuangdongTerminalMobile

handsetBeijingEricssonMobileTelecomShanghaiEricssonEricssonChinaDistributors/dealersRationaleEricsson'sroutetomarketisbased

onproductcharacteristicsCoreproductsaresoldthroughtheEricssonsalesforceSmallerproducts

aresoldthroughJVsanddistributorsElectroniccompo-nentsWired-lineDistributors/dealersSource:Ericssonpressrelease,interviews,McKinseyanalysisChongqingEricssonTechnologyNanjiingEricssonMobileTerminalHeilongjiangBeijingEricssonSAMSUNG010605BJ-kickoff217ERICSSONPRESENTS"ONEFACE"TERICSSONISSTRONGATTECHNOLOGYANDMARKETING,BUTRELATIVELYWEAKATMANUFACTURINGANDSERVICEINMOBILEHANDSETTechnologyleaderinGSM,GPRSand3GFirsttoreleaseWAP,GPRS,bluetoothhandsetsExpandedlocalmanufacturingwith2JVsdevotedtomobilehandsetsCentralizedpurchasingandsupplyR&DManufac-turingandsupplychainMarketingandbrandingSalesanddistributionServiceCentralizedmarketingfunctionstopromotestrongandconsistentbrandimageGoodrelationshipwithresellerssuchasPTACandPTICStrengthsLackofbig-hittingnewmodelsProductdevelopmentnotmeetingmarketdemandinChinaManufacturingwithuncompetitivecoststructureLocalproductioncapacityinsufficientcomparedwithMotorola,NokiaandSiemensInsufficientsupportprovidedbytheresellerslimittheabilityofitsdealersandchannelstoprovidepre-andafter-salessupportLevelsforimprove-mentSource:Ericssonpressrelease,IDC,McKinseyanalysisSAMSUNG010605BJ-kickoff218ERICSSONISSTRONGATTECHNOLOERICSSONDISTRIBUTESTHROUGHFIVEFIRST-TIERRESELLERS

Source:IDCRationalesEricssonusesPTAC,PTIC,Stellar,508,andtheUnitedFirstasits5first-tierresellers.Sincethereisahugepricegapbetweenofficialandparallelimports,theunitsalesofEricssonhandsetinChinathroughofficialchannelswasaffectedresultingindownwardpressureonhandsetprices.Insufficientsupportprovidedbyresellerslimittheabilityofitsdealerandchannelstoprovidepre-andafter-salessupporttocustomers,whichgreatlyafftectEricsson’spositionintheChinamarketEricssonChannelStructureBeingamajormobilenetworkequipmentvendor,EricssonmaintainsgoodrelationshipwithgovernmentbodiesanddistributesthroughPTAC,PTICandlocaltelecomoperatorsVendorPTAC,PTIC,etc.ConsumersLocaltelecomoperatorsRetailers/retailchainstoresSAMSUNG010605BJ-kickoff219ERICSSONDISTRIBUTESTHROUGHFORGANIZATIONANDOWNERSHIP1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff220ORGANIZATIONANDOWNERSHIP1.BEricssonhas10JVsand4WOFEsinChina,amongwhichBeijingEricssonMobileandNanjingEricssonMobileTerminalaredevotedtomobilehandsets.Ericssonbelievesthatlocalizationiskey.Ericssonusesjointventurepartnerstoenterthemarket,andestablishedholdingcompanyin1994tobettermanagelocaloperationsEricssonusesitsownsalesforcetosellcoreproductsanddeliverscoordinationtocompetein“solution”salesKEYMESSAGES-ORGANIZATIONANDOWNERSHIPSAMSUNG010605BJ-kickoff221Ericssonhas10JVsand4WOFEServiceERICSSONCHINAHASCENTRALIZEDMANYCOMMONFUNCTIONSFROMJVsEricssonChinaLtd.NanjingEricssonNanjingEricssonmobileterminalBeijingEricssonmobileGuangdongEricssonChongqingEricssontechnologyMarketingandbrandingPurchasingandsupplyManufac-turingSalesManufac-turingSalesR&DManufac-turingSalesServiceMarke-tingSalesServiceMobileinfrastructureMobilehandsetMobilehandsetMobilebasestationMobileinfrastructureMobileinfrastructureSource:EricssonpressreleaseSAMSUNG010605BJ-kickoff222ServiceERICSSONCHINAHASCENTERICSSONHAS10JVsAND4WOFEsINCHINA,AMONGWHICH2JVsAREDEVOTEDTOMOBILEHANDSETS

Source: Ericssonpressreleases;literaturesearch;interviewsEricssonChinaLtd.(HoldingCo.)1994Esta-

blished

yearBeijingEricssonBeijing

EricssonMobileShang-haiEricssonHelong-jiangEricssonNanjingEricssonMobileTerminalGuang-dongEricssonNanjingEricssonWuhanYangtzeEricssonChong-qingEricssonTelecomChong-qingEricssonTech.EricssonR&DcenterShanghaiEricssonConsult-ingShanghaiDalianEricsson1994199519971995199219971998199819971999ProductofferingPBXMD110Mobile

handsetMobile

base

stationElec-

troniccompo-nentsTele-

com

equip-

mentserviceMobilehand-

setMobileinfra-structureservicesGSM

900/

1800

AXE10SDHtrans-missionsystemsDigitalmicro-waveMobilesystemmarket-ingsalesandserviceSoft-wareapplica-tionConsul-tingserviceforwire-lessandfixedlineopera-torsTech-nicalservice55%

withBeijingCableTelecom49%withPTIC,BeijingTelecomCom-ponents,BeijingTelecomEquipment,YunShing80%withShanghaiSimtek56%withGDPTAGuang-

dong

Mach-

inery

Import

and

Export55%withNanjingRadioFactory,HKYunShing

47.5%withWRILongxingInvest-mentChang-qingSouth-westWirelesstelecom100%100%100%65%withNanjingPandaSAMSUNG010605BJ-kickoff223ERICSSONHAS10JVsAND4WOFEERICSSONUSESJVPARTNERSTOENTERTHEMARKETANDITSOWNSALESFORCETOSELLCOREPRODUCTSInfluenceEricssoncorporatefocusedontoptotoprelationsJointventurepartnershelptogainlocalcustomeraccessPartnershipstructure&roleEricssonChina

(10jointventuresand4WFOEs)HoldingcompanyaimstocoordinateallactivitiesinChinaWFOEforsoftwareR&DinChinaLimitedtechnologytransfertoChina–heavilyimportdependentServicejointventuresarecostcentersRoutetomarketEricsson’ssalesforce(basedintheholdingcompany)sellscoreproducts(switchingandtransmission)JointventuresalesforcesellssmallandstandaloneproductsWirelessproductssoldthroughdistributorsKeymessagesUsesjointventurepartnerstoenterthemarket,thenestablishedholdingcompanyin1994tobettermanagelocaloperationsUseitsbetter-trainedownsalesforcetosellcoreproducts;deliverscoordinationtocompetein“solution”salesBelievesthatlocalizationiskey;establishedspeciallymonitoredcareertrackforpromisingChinesemanagerstoenhanceretentionSAMSUNG010605BJ-kickoff224ERICSSONUSESJVPARTNERSTOEFINANCIALPERFORMANCE1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff225FINANCIALPERFORMANCE1.BackgrAlthoughEricsson’sconsumerproducts,i.e.mobilehandsetsgrewinrevenueby28%in2000,theprofitwasnegativeatSEK–16billion.Theoperatingprofitmarginformobilehandsetis–29%globallyin2000Ericsson’snetworkproductsgrewinrevenueby29%in2000,andinprofitby65%.Theoperatingprofitmarginfornetworkproductis17%globallyin2000Tomaintainitsleadershippositioninnetworkproducts,EricssonmaybecomeanichemarketplayerinmobilehandsetsKEYMESSAGES-FINANCIALPERFORMANCESAMSUNG010605BJ-kickoff226AlthoughEricsson’sconsumerpERICSSONSAWNEGATIVEPROFITFORITSMOBILEHANDSETSIN2000SEKbillionsRevenuesglobally19992000NetworkoperatorsserviceprovidersConsumer*productsEnterprisesolutionsOthers19992000Consumer*productsNetworkoperatorsserviceprovidersEnterprisesolutionsOthers2019215274CAGR=27%CAGR=

-5%Operatingprofitglobally *ConsumerproductsaremainlymobilehandsetsSource: EricssonpressreleasesSAMSUNG010605BJ-kickoff227ERICSSONSAWNEGATIVEPROFITFSAMSUNG010605BJ-kickoff228SAMSUNG010605BJ-kickoff228SAMSUNG010605BJ-kickoff229SAMSUNG010605BJ-kickoff229SAMSUNG010605BJ-kickoff230SAMSUNG010605BJ-kickoff230CONFIDENTIALMobileHandsetCompetitorAnalysis:EricssonSAMSUNGELECTRONICSCHINA(SECChina)August20,2001Thisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.SAMSUNG010605BJ-kickoff2CONFIDENTIALMobileHandsetComOVERVIEWOFCOMPETITORANALYSISFRAMEWORK1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff232OVERVIEWOFCOMPETITORANALYSIKEYISSUESTOPROBE-ERICSSONStrategyProduct/marketValuechainstrategyOrganization&ownershipFinancialperformanceWhatwillbeEricsson’sstrategicfocusforthenext5years?HowwillEricssonsecureitsleadingpositioninmobileinfrastructure?WhatproductswillEricssonbefocusingon?WhichmarketsegmentwillEricssonbeinterestedin?WillEricssonbecomeanichemarketplayerinmobilehandset?HowdoesEricssonsecureitsleadershipintechnology?HowdoesEricssonimproveitslocalproductioncapability?HowareEricsson’smobilehandsetsdistributed?HowdoesEricssonorganizeitsJVsandWOFEs?WhatfunctionsdoesEricssonChinacentralize?HowgoodisEricsson’srecentfinancialperformance?HowwillEricssonimproveitsperformanceinthefuture?SAMSUNG010605BJ-kickoff233KEYISSUESTOPROBE-ERICSSONBACKGROUNDINFORMATION1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff234BACKGROUNDINFORMATION1.BackgERICSSONISATECHNOLOGYLEADERINMOBILECOMMUNICATIONANDAMARKETLEADERINMOBILEINFRASTRUCTUREImplicationLeaderinmobilesystemtechnologyincludingGSM,GPRSand3GEmphasizeonmobileinfrastructureandclaimtobetheonlytotalsolutionproviderforafullrangeof2Gand3GstandardsLocationBasedatSweden,with24officesinChinaSince1998,ChinahasbeenEricsson'slargest

marketintheworldInvestmentInvestedmorethanUSD0.6billioninChinaBusinessFourmainbusinessunits:Mobileinfrastructure,mobilehandset,datanetworkandcircuitswitching/packetswitchingmulti-servicenetworksStartingFirstofficeinChinain1985,firstJVinChinain1992Employees100,000staffin140countriesOver4,000employeesinChina24offices,10JVsand4WOFEsHistory1985:FirstEricssonofficeinBeijing1987:FirstmobilenetworklaunchedQinhuangisland1989:SetupofficesinGuangzhouandShanghai1992:StartedJVsinChinaformobileinfrastructureandhandset1994:EstablishedEricssonChinaLimited1995:ChinabecameEricsson'sthirdlargestmarketintheworld1996:ChinabecameEricsson'sssecondlargestmarketintheworld1997:EstablishedR&DcenterinShanghaiandEricssonChinainstitute1998:ChinabecameEricsson'slargestmarketintheworld,establishedChongqingEricssontechnology1999:EstablishedEricssonconsultinginShanghaiandmobilemulti-medialabin

Zhonguancun2000:FirsttocompleteWCDMAtestinChinaBackgroundSAMSUNG010605BJ-kickoff235ERICSSONISATECHNOLOGYLEADESTRATEGY1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff236STRATEGY1.BackgroundinformatERICSSONAIMSTOSECUREITSLEADERSHIPPOSITIONINNETWORKEQUIPMENTANDMAYBECOMEANICHEPLAYERINMOBILEHANDSETProductMaintainfootholdinthelowendmobilehandsetmarketthroughJVwithNanjingPandaDevelop3Gtechnology(WCDMA)formobilecommunicationbycollaboratingwithMIIandDoCoMo,andapplyleadingtechnologytoproductsSecureitsleadershippositioninnetworkequipmentratherthanbecomingthebest-sellingbrandformobilehandsetsValuedeliverysystemR&DlocalizationthroughcollaborationwithChinesegovernmentanduniversitiesFurtherexpandlocalproductioncapacityCentralizemarketingfunctionsunderEricssonChinaDistributethough5first-tierresellersincludingPTACandPTICBuildsconsumerwebsiteforEricssonhandsetusersVisionToinnovateinmobilenetworkandinternetconvergenceandtoleadintheeraofmobileinternetStrategySource:Ericssonpressrelease,DresdnerKleinwort,McKinseyanalysisSAMSUNG010605BJ-kickoff237ERICSSONAIMSTOSECUREITSLEERICSSON’sMARKETSHAREISDECREASINGOVERTHEPASTFEWYEARSMonthlymarketsharedevelopment(Percentofmarketinunitssold)9899Jan‘00Dec‘00NokiaMotorolaSiemensEricssonSource:RetailAuditSource:IDC,McKinseyAnalysisSAMSUNG010605BJ-kickoff238ERICSSON’sMARKETSHAREISDECERICSSONISNOWNUMBERFOURINSALESVOLUMEANDNUMBERFIVEINREVENUEINTHEMOBILEHANDSETMARKETOthersSiemensEricssonMotorola199920012000SamsungNokiaBreakdownofsalesbybrandeachyearPercentSource: GfK,IDC,McKinseyanalysisOthersSiemensEricssonMotorola199920012000SamsungNokiaBreakdownofunitssoldbybrandeachyearPercentSAMSUNG010605BJ-kickoff239ERICSSONISNOWNUMBERFOURINPRODUCT/MARKET1.BackgroundinformationLocationRegistered

capitalManagement

teamEquity

structureStartingyearNumberof

employeesEraanalysis4.Valuechainstrategy5.Organizationandownership6.FinancialperformanceFocusonMarketing,

advertisingand

promotionDistribution(channel

andsalesforce)OrganizationstructureOwnershipstructureSalesProfit2.Strategy3.Product/marketMissionVisionCorporatestrategyMarketpositionKeyproductofferingsKeycustomersValuepropositionGeographicfocusPricingSAMSUNG010605BJ-kickoff240PRODUCT/MARKET1.BackgroundinEricssonclaimstobetheonlytotalsolutionproviderinmobilecommunicationwhooffersafullrangeof2Gand3Gstandards.Tosecureitsleadershippositioninmobileinfrastructure,