L.M. Ericsson’s relationship to the state was also shaped by Sweden’s mixed-economy ideology. One fiscal instrument that existed from 1955 allowed tax-free allocations to special funds that Swedish companies could set up. To some extent these had to be deposited in frozen accounts with the Bank of Sweden, and companies were able to draw on them only with government permission. From the beginning of the 1960s, L.M. Ericsson made a series of deals with the Ministry of Finance and the Labor Market Board through which the company used these funds to make major investments in locations where the authorities wanted to create jobs.

This led to a wave of relocations so that by the beginning of the 1970s more than three-quarters of L.M. Ericsson’s production capacity came from 18 factories outside the Stockholm region.

Another area of cooperation was formally established in 1956 when the Electronics Board was set up to coordinate efforts by L.M. Ericsson and ¬Televerket on development of transistors and other issues. Bertil Bjurel from Televerket, whose initiative this was, records in his memoirs that L.M. Ericsson was “not enthusiastic about the idea of time-consuming cooperation. But when your largest customer speaks, you listen and accept.”

He writes: “We had a naive belief that transistors would replace telephone relays more or less relay by relay. We had very little awareness of the development of integrated circuits with enormous numbers of transistors that took very little room. Nobody could envisage the way things would go, with prices falling all the time. Nor could we predict the fabulous improvement in reliability.”

Top management at both L.M. Ericsson and Televerket frequently emphasized the importance of strict coordination of joint development efforts. But according to authors Meurling & Jeans in reality, “the necessary culture was lacking, the results were minimal and they ended up going off in different directions.

THE AKE-12 EXCHANGE

L.M. Ericsson’s largest development project during the 1960s was the AKE-12 exchange.

In the company’s terminology (in which every product and component down to the smallest screw was registered in a hierarchical system using three letters followed by numbers), A stood for automatic telephone exchange, K for code selector and E for electronic control.

The basic idea behind the AKE-12 was stored program control (SPC) technology which meant that all the functions of a telephone exchange were to be controlled by computers.

In retrospect, Björn Lundvall, who had become CEO at L.M. Ericsson in 1964, had to admit that the number of programming errors in the AKE-12 had been gravely underestimated and the SPC technology was not cost-effective. Even so, the decision was taken to develop the AKE into a more powerful version, the AKE-13, based on multiprocessor control.

At the same time, Televerket was developing a competing exchange, the A210, and installed a test version at Storängen in Nacka, Stockholm. Haug says: “It was quite obvious that Televerket wanted to compete with L.M. Ericsson’s AKE. The system concepts were presented at several conferences at the end of the 1960s. At Televerket we devoted an enormous amount of work to the exchange, with Bengt-Gunnar Magnusson as a particularly talented chief designer.”

Author: Svenolof Karlsson & Anders Lugn

MEETING BETWEEN THE TELECOM REGULATOR AND L.M. ERICSSON

The topic was research and development within electronic conncections.

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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