Ericsson (ERIC) Advances 5G Innovation for Industrial Automation

Zacks Equity Research
·4-min read

Ericsson ERIC recently announced that it has successfully tested an advanced 5G millimeter wave-powered drone in its USA 5G smart factory. The test was carried out in collaboration with Qualcomm and industrial drone solutions provider Dronus. Qualcomm’s QRB5165 processor was utilized in conjunction with Ericsson’s end-to-end private 5G network and 5G mmWave from Telit Cinterion.

This proof of concept marks the first instance when a natively mmWave 5G device is used in an industrial setup. It highlights a significant technological leap as it moves away from traditional wired or WiFi connections towards direct, high-speed 5G connections.

Wired connections, though reliable, reduce mobility, while WiFi provides mobility, but the Internet connection is less stable and slower. Moreover, having native 5G mmWave discards the need for external gateways or hotspots or any intermediary device to connect with the 5G network.

The built-in support for high-frequency millimeter wave (mmWave) 5G technology makes it suitable for real-time applications. Its flight control system is optimized for indoor use, enabling it to navigate seamlessly within the factory, which usually has more obstacles and tight spaces compared to an outdoor setting. Equipped with live video streaming cameras, the drone efficiently performed autonomous inventory checks, focusing on high racks. This automated task is faster and more accurate than manual checks, which are very time-consuming and prone to human error.

Industries are increasingly moving toward automation in their factory and warehouse setups. The change is propelled by several factors, such as competitive pressure, the need for higher productivity, and to reduce operational costs. Substantial growth in e-commerce is driving the demand for efficient warehousing solutions. To respond more flexibly to market trends, businesses are investing in automation to streamline their supply chain. The industrial automation market is expected to witness a substantial uptick in the upcoming years. However, automation for high bandwidth intensive industrial use cases demands robust 5G networks.

Recognizing these trends, Ericsson is focusing on developing 5G use cases to cater to advanced applications such as unmanned aerial vehicles. The recent successful demonstration certainly paves the groundwork for commercial usage of 5G mmWave devices in inventory management in the future. This will significantly boost ERIC’s commercial prospects in the long run.

With the emergence of the smartphone market and the subsequent usage of mobile broadband, user demand for coverage speed and quality has increased exponentially. Further, to maintain performance with increased traffic, there is a continuous need for network tuning and optimization. Ericsson is much in demand among operators to expand network coverage and upgrade networks for higher speed and capacity. The company is reportedly the world’s largest supplier of LTE technology with a significant market share and has established a large number of LTE networks worldwide.

The company focuses on 5G system development and has undertaken many notable endeavors to position itself as a market leader. It believes that the standardization of 5G is the cornerstone for digitizing industries and broadband. Ericsson expects mainstream 4G offerings to give way to 5G technology in the future. It currently has 162 live 5G networks across the globe, spanning 69 countries.

The stock has gained 11.6% over the past year compared with the industry’s growth of 50%.

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Zacks Rank & Stocks to Consider

Ericsson currently carries a Zacks Rank #3 (Hold).

NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy) at present, delivered a trailing four-quarter earnings surprise of 18.43%, on average. In the last reported quarter, it delivered an earnings surprise of 11.48%. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.

Arista Networks, Inc. ANET, sporting a Zacks Rank #1 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 15.68% and delivered an earnings surprise of 15.39%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

Silicon Motion Technology Corporation SIMO, sporting a Zacks Rank #1 at present, delivered a trailing four-quarter average earnings surprise of 4.72%.

It is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company also designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers and other customers.

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