Nokia has announced that it is going to lay off more than 4,000 workers in three countries in 2012 in an effort to cut costs and remain competitive with other smartphone manufacturers like Apple and Samsung. The company also laid off 10,000 workers in 2011. Nokia currently employs a sizeable workforce in countries like Hungary and Finland (its home country). However, it seems the pressures of the international smartphone market have proved too much for the manufacturer, who now plans to shift operations to Asia in order to increase efficiency and lower manufacturing costs.
The move is a sensible one, as Asian countries like China have been the driving success behind other companies like Apple, HTC and Samsung whose manufacturing processes lie entirely in the country. The main benefits that come with shifting to Asia are reduced labour costs, ample cheap human resources and even cheaper component costs. Nokia has finally realized that it needs to massively cut costs and streamline its operations in order to get back into the black, especially after the humongous $1 billion loss in Q4 of 2011.
These 4000 job cuts will be spread across Nokia’s production plants in Hungary, Mexico and Finland. Nokia has issued a statement saying that the manufacturing process will now be completely shifted to Asia, though the plants in the aforementioned countries will not be shut down. Instead, they will focus on the software-intensive part of the production process. Neil Mawston of Strategy Analytics was quoted as saying that Nokia’s move is in line with what other manufacturers have already done in the past, and makes sense as not only will it allow production at a cheaper cost, it will also place the supply of devices nearest to the largest growing mobile market in the world: China and India.
Nokia has said that the move will allow the company to bring out innovative products faster and ultimately become more competitive in the long run. The company has been hit with declining sales worldwide. Not only has it lost the smartphone market in the US, it has also been challenged by Chinese manufacturers like ZTE in the low end market. Its latest Q4 2011 results showed a 20% decline in revenue to $13.11 billion compared to the same time last year.
Nokia’s shares in Finland closed slightly up at $5.11 after this announcement.
