Focus on telephony
The Second World War created domestic demand for Ericsson in the form of war materials. World events also had an effect on the company by closing the private Swedish market to imports and thus paving the way for the company's products. The production of meters, for instance, had germinated under customs and cartel protection during the 1930s and blossomed in the greenhouse climate of the 1940s.
Siemens & Halske's meter plant in Nuremberg, which had ten times the capacity of Ericsson, was bombed to bits in 1943 and was unable to assert itself in Sweden. With its most serious competitor out of the running, Ericsson was able to capture the lion's share of the domestic market – 70 percent at the end of the war. Ericsson also took the opportunity to take over export markets, such as Spain, Bulgaria and South America. Meter production was so substantial that Ericsson decided to construct a special plant in Ulvsunda in 1943 and formed a subsidiary called Ericssons Mätinstrument Aktiebolag (ERMI).
A similar greenhouse effect arose in the electronic tube area. During the war, the new Svenska Elektronrör subsidiary also saw the opportunity to take over the market for broadcasting tubes. Technically, this was complicated, but as long as the foreign competitors were excluded, it was possible to make a profit. The question was what would happen after the war if the borders were reopened - would this production really be expanded?
The war years meant, therefore, that Ericsson focused on extraordinary manufacturing and was able in this way to compensate for the loss of orders for traditional telephone materials. This diversification route was a simple choice during the first years of the war - as long as the investments required were not too substantial and gave reasonable returns, all offers were accepted. The matter later became difficult when the orders for traditional telephone material improved and total employment increased. Following a weak period, the number of workers at Midsommarkransen in 1942 had returned to the 1939 level of about 3,500. Should capacity continue to be expanded to accommodate diversified production, which it might not be possible to maintain after the war?
The flood of new, and interesting, production items turned into a torrent - bank-note counters, shavers, record-changers for gramophones, etc. The question was whether to tie development resources to these odd projects or to concentrate on what was, after all, the company's traditional niche. Plant manager Hans Thorelli believed in 1943, when an end to the war could be seen, that new recruitment should be stopped and that there should be a focus on telephony. It could be beneficial to have several legs to stand on, he thought, but it now seems as if we have become a millipede, from which some of the legs must be removed.
The order backlog in the area of telephony began to grow in 1944 and this was an early indication of the exceptional boom during the post-war period. The problems of diversification faded away. There was no longer any time or capacity to focus on new areas. This was an important turning point in the company's history. Ericsson was back on track - concentrating on advanced telephony and based in Sweden, but looking towards foreign markets. A quarter of a century after the war, the situation would be entirely different. The parent company's production would be ten times greater - in financial terms - and two-thirds of that would be attributable to foreign sales.
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