Finnish phone-maker will close plants in Finland, Mexico and Hungary, shifting production to lower-cost operations in Asia.
February 8, 2012
by The Canadian Press
HELSINKI, Finland—Nokia Corp. will stop assembling cellphones in Europe by year-end as it shifts production to Asia, cutting another 4,000 jobs in its latest attempt to cushion itself from stiff competition in the smartphone sector.
The Finnish company is cutting jobs at three plants in Finland, Mexico and Hungary as it reorganizes global manufacturing operations to compete better with Apple Inc.’s iPhone and handsets using Google Inc.’s Android operating software.
The cuts come on top of nearly 10,000 layoffs announced last year.
Nokia said it had increasingly shifted cellphone assembly from Europe to Asia, where the majority of component suppliers are based, to help it reach markets faster. The company said it would not close the three factories, however.
Neil Mawston from Strategy Analytics said Nokia’s move “made sense” and was in line with what other cellphone makers had been doing for years, such as Samsung Electronics Co.; Motorola Inc.; and Sony Ericsson, which had large assembly plants in Europe.
“It’s an unstoppable trend really. Essentially, labour costs, land costs and other associated costs are so much lower in Asia,” Mawston said. “Also, Asia is so much closer to the biggest pool of users now so from a supply and demand side Asia looks a lot more attractive than Europe.”
Nokia said the shift to Asia will enable it to introduce innovations into the market more quickly.
The company has lost its dominant position in the global mobile phone market when Android phones and iPhones took over the growing smartphone segment. It’s also been squeezed in the low-end by Asian manufacturers making cheaper phones, such as ZTE.
Nokia has been the leading handset maker since 1998 but after reaching its global goal of 40 per cent market share in 2008, the company has gradually lost overall market share. It plummeted to below 30 per cent last year.
In an attempt to remedy the slide, Nokia launched its new Windows Phone 7 in October, eight months after announcing a partnership with Microsoft Corp., heralding a major strategy shift as it adopted the Windows operating system.
Last month, the company reported smartphone sales plummeted 23 per cent globally in the fourth quarter as net revenue fell 20 per cent to $13.11 billion compared to a year earlier.