Nokia Corp. (NYSE: NOK) said last week it was transferring more smartphone device assembly to its Asian factories, a move that will cut 4,000 jobs at plants in Europe and Mexico.
The stated reason won't surprise anyone working in the electronics sector: Get to market faster by being closer to suppliers.
"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," said Niklas Savander, Nokia executive vice president, markets, in a press release.
Nokia has had its share of troubles these last few quarters -- some of which stem back to its partnership with Microsoft and the increased competition from other companies such as Apple, Samsung, and other Android-based handset makers. Clearly, the Finnish company has to trim even more costs and keep its operational budget in line. (See: Nok-Win a No-Win Combination.)
The cutbacks, which will hit manufacturing facilities in Finland, Hungary, and Mexico, brings total planned job cuts to more than 30,000 since Stephen Elop took the CEO spot in September 2010, cites Reuters. And it comes on the tail of bad earnings news: Fourth-quarter smartphone sales fell 31 percent from a year ago, and the company had "a steep loss" for the quarter, according to the wire report.
Ironically, perhaps, the headcount cut also overlaps with rumors about the splash Nokia wants to make at the big telecom show, the Mobile World Congress, later this month. According to several reports, including one from Pocketnow, Nokia could be introducing six devices -- three smartphones (two Windows Phones and a Symbian) and three feature phones. One of them seems to be going after the high-end market, according to a Forbes post.
Leading up to last year's MWC, Elop laid out his plan for reviving Nokia and followed up with additional details in an Engadget video interview, with particular emphasis on how the company was going to build out its Microsoft relationship. The company didn't announce any new devices at the last year's conference, the annual main event for anyone who's anyone in the mobile space. (See: The Problem With Nokia.)
The plus side is that Nokia is still the undisputed king of the low-end handset range. Maybe, that's not such a bad thing -- capturing the high-volume, low-end niche. There are still millions of people in Africa, Asia, and Latin America that rely on these kinds of phones.
As we all know, though, the money -- and the margin -- is in the smartphone business. Nokia's chance to get any significant portion of that market looks bleaker every month. We'll see what Elop has to say at this year's MWC show, starting Feb. 27.
Right now it shouldn't enter into tablet t.Alex as rightly pointed, first they need to establish windows + Nokia product it needs to flourish like other phones. Parallelly they can ideate a device that might do better ones
There are still millions of people in Africa, Asia, and Latin America that rely on these kinds of phones.
I would like to see Nokia in near future with device that can compete with Blackberry in places like Asia and Africa. I bet you, Nokia may find it difficult to fight in those markets years to come. Africa in particular more and more people are grabing smartphones and tablets ( iPad especially) with internet connectivity.
jbond - i agree...at this point I don't see them as a viable competitor to Apple or Samsung, but in the markets where they are strong, I think could strategically stay a leader if they would develop a stronger a mixed-product portfolio for those regions.
prabhakar - I agree with you. Asia and other emerging markets still have a lot of love for Nokia, but like you said they aren't moving fast enough to capture the transition sales that would naturally comes as feature phone users migrate to smartphones.
If Nokia could figure out this sweet spot --winning the conversion sales in growing BRIC economies, they might actually do more than survive.
Jacob - I'm not sure Nokia's layoof and transferring prodcution to Asia is purely cost savings. Yes, of course, they are big part of the equation, and even with Chinese labor rates rising at a double-digit pace, I imaging paying workers in China is still far-and-away cheaper than paying wages in Finland, one of the most expensive countries in Europe. Also, since Nokia's bread and butter right now is the low-end handset -- phones that have very low margins -- balancing the balance sheet. I guess what I'm not clear on is how much of the design aspect and startegy planning will remain in Europe, and how will they innovative on creating higher-margin products for mature markets while maintaining a sharp focus on high-volume sales in low-cost markets. That I don't has been explained, at least not in the stuff I read
Nemos -I see your point about national pride perhaps influencing a consumers sales choice, but not sure if it totally sways every purchase.
In the US, we saw this "Made in the USA" flag-waving consumer-buying campaign some time ago when labor and production were offshored. Sure, maybe that got some people to buy an American-made car, for instance. But I would bet, they made that decision while sippling Columbia-grown coffee; wearing a t-shirt made in Thailand and sneakers made in Vietnam, and doing internet research on their Japanese-designed/Chinese-made smartphone or laptop. I think in a global economy, national pride is reserved these days for the political stage, not the business one.
That number made my eyes pop too. Gradual cuts over time add up to surprising figures. From a pr standpoint, it makes sense to have layoffs in stages. But from an analytical perspective, the collective number begs the question of how deep the problems have been.
A new report shows that most of the worrisome issues that the supply chain industry has been dealing with for years are not new, but there are some new concerns that need answers. Here’s a look at what keeps supply chain professionals up at night.
When it comes to shipping supplies from China to Europe, trains might be the most cost-effective way companies have available to them. DHL is looking to jump on that bandwagon.
For many dealing with the enormous task of tracking,
reporting, and resolving issues associated with
potential counterfeit parts, there is a collective
hope that 2013 will bring clearer guidance on what
needs to be done by whom and when.
A necessary foundation for moving efficiently at real-time speed, supply chain analytics is still very much at the beginning stages of development at many companies.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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