Who Lost Lucent?: The Decline of America’s Telecom Equipment Industry
As America transitions to 5G wireless networks, the U.S. intelligence community sees the Chinese telecom giant Huawei as a systemic security risk. In response, President Trump has banned the use of Chinese 5G equipment in U.S. networks. But despite these measures, there is still deep concern that eventually Huawei will dominate global markets, displacing the other major 5G providers, Europe’s Ericsson and Nokia. To address this challenge, a number of proposals have been floated, including that the U.S. government buy shares in Ericsson or Nokia or provide incentives for U.S. companies to produce 5G gear.
But as Rob Atkinson writes in the fall 2020 edition of American Affairs, few are asking why there is no American telecom equipment company. After all, in the 1970s the two largest telecom equipment manufacturers were U.S. companies: Western Electric and ITT. Even in the late 1990s, the two largest were still based in North America: Lucent and Nortel (headquartered in Canada but employing tens of thousands of workers in the United States). In 1999, Lucent was almost three times larger than its next two rivals and was the sixth largest company in America in terms of capitalization. Nortel accounted for over one-third of the capitalization of the Toronto Stock Exchange. By 2008, however, Nortel was bankrupt, and Lucent was a sliver of its former self, having been sold off to Alcatel, a French company, which was later bought by Finland’s Nokia.
What happened? How did America go from the world’s leader to not even an also-ran in the span of just two decades? Equally troubling, why did no one sound the alarm bell when there was still time for action?