HARDWARE MANUFACTURING

Summary 

According to Country Commercial Guide and Strategis, there is no significant local production of telecommunications equipment in Ecuador. Some small and medium-size plastic industries produce parts for telephone sets, assemble, and do cosmetic finishing on telephone networks using imported parts.  Additionally, some electric materials suppliers build control panels for telecommunications systems automation, import the electric components and assemble them locally.

Market Numbers

According to Strategis, the market for telecommunications equipment in Ecuador was $318 million in 1998, almost all of which was supplied by imports. U.S. telecommunications exports to Ecuador in 1998 were $51.7 million. U.S. government export statistics indicated that telecommunications exports in 1999 dropped significantly to approximately $18.3 million. U.S. firms supply about 40 percent of telecommunications equipment imports. Other major suppliers include Japan, Sweden, Germany, France, Spain, Italy and Korea (Source: Strategis).

• Equipment Market Size:                 $318 million (1998)

• Import Penetration:                         99 percent

• U.S. Exports:                                $18.3 million (1999)

Market Environment

Local production of telecommunications component parts totaled USD $18 million in 1998. Imports of telecommunications equipment account for 95% of the total market for mobile and fixed telecommunications products. U.S. and European telecommunications equipment suppliers have established a network of distributors that market and sell their products to end-users.  Some large European telecommunications companies have local representations that both sell the products directly to the end-users, and distribute the equipment to a network of smaller companies that sell various brands of equipment to the final consumers.  Major third-country equipment suppliers in 1997 included: Spain with USD $48 million,  France with USD $49.6 million, and Sweden with USD $21.6 million, capturing a combined 45% of the total market.  Other countries such as Panama, Korea, Italy, Canada, Germany and Japan account for the remainder percent of the import market (Source: Strategis).

European firms including Ericsson, Telia and Alcatel have supplied most of the fixed telecommunications equipment currently in use. These European suppliers and their governments provided the Ecuadorian government with attractive financing opportunities for their needed hardware maintenance and expansion projects.  The terms of the financing agreements were tied to the sales of equipment from these suppliers.   When Ecuador's fixed telecommunications sector is privatized, the companies that win the concession for the provision of fixed telecommunications services will determine if the market remains dominated by European suppliers, or opens to other manufacturers and providers (Source: Strategis).

U.S. companies in Ecuador supply mobile telecommunications equipment, such as cellular telephones, beepers, radio communications, trunking, satellite TV, and related value added services equipment.  For example, Motorola was the first brand of cellular telephones, beepers, pagers, and radio communications equipment in the country. U.S. companies are also positioned in the switching and data transmission equipment market.

This report was completed in December 2000 for the class Impacts of National Information Technology Environments on Business given by Professor Erran Carmel in the program of Management of Global Information Technology at the Kogod School of Business in Washington DC