Blog Post

Nokia factories shift to Asia: Did it have any choice?

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Nokia (s:NOK) confirmed plans to shift the heart of its manufacturing operation to Asia, cutting 4,000 jobs from existing factories and moving their roles to China and South Korea.

Employees at three major plants in Finland, Hungary and Mexico had been waiting anxiously for the announcement, which becomes the latest in a series of massive cuts to the company’s staff as it tries to find around $1 billion in savings to bolster the bottom line. Over the last year as Nokia tries to reorganize around its Windows Mobile strategy, the struggling mobile giant has slashed jobs, outsourced its Symbian development and closed a factory in Romania.

The company said that it reviewed its smartphone manufacturing operations and come to the conclusion that it made sense to move its manufacturing centers closer to the component suppliers, who are largely located in China. Instead, the remaining staff at the three locations would focus on receiving phones made in Asia and customizing them for the European or American market.

In a statement, executive vice president of Markets, Niklas Savander, said it would allow Nokia to act faster and be more responsive — two weaknesses that have been severely criticized as the business struggles to cope with the rise of rivals like Apple (s:AAPL) and Google’s Android (s:GOOG).

“Shifting device assembly to Asia is targeted at improving our time to market. By working more closely with our suppliers, we believe that we will be able to introduce innovations into the market more quickly and ultimately be more competitive.”

Nokia hasn’t actually said how much money it hopes to save through the changes, but it is clearly hoping to squeeze more out of its relationships with suppliers and get products out without the extensive delays they seem to have been subjected to.

In many ways, the move has been a very long time coming — the vast majority of the electronics industry has already moved manufacturing to China, either in-house or outsourced to companies like Foxconn, and Nokia’s decision will add an extra layer to the ongoing question of whether Western factories can compete at all with the Asian market.

That was one of the subjects explored in a recent New York Times series focusing on Apple’s manufacturing operations, which have shifted from American factories to China over the years.

Of course, the job losses will sting — and cuts in Finland will hardly boost its standing at home. But the reality is that the company had few options: inside a generation, China has become not only one of the cheapest electronic manufacturing markets in the world, but also the one that sports the greatest amount of expertise.

Could Nokia have done anything else?

Photograph of Nokia plant in Salo, Finland, used under Creative Commons license courtesy of Flickr user uncle-leo

3 Responses to “Nokia factories shift to Asia: Did it have any choice?”

  1. Dan Thornton

    I’d agree that Nokia was in a tricky position, but I do wonder how switching production will hurt brand value. The perception of Scandinavian quality is something which can justofy a higher price point than churning out hardware alongside every other brand, and with a shared OS on their high end phones and less differentiation in perceived build quality, Nokia only has the merits of each individual handset to battle with…

    Obviously Apple has managed to add design and perceived value over and above the fact that their hardware is also produced in the Far East, but is there room for more than one company to do that in the same market?

  2. How f***en hard is it for bloggers and journalists to get it right? The platform is Windows Phone, not Windows Mobile.

    Windows Mobile is Microsoft’s old platform which was discontinued.

    Nokia’s strategy for smartphones uses Windows Phone as the OS.

    • Bobbie Johnson

      Guilty as charged: old habits die hard, I guess. Is there a word to describe the phrases that automatically spill out through your fingers when you’re typing? I’ll correct.