Nokia cuts staff at China factory

Nokia Corp confirmed to the Global Times Sunday that the company's global retrenchment plan covers its factory in Dongguan, South China's Guangdong Province.

The company has cut about 100 staff at the Dongguan factory as part of its global strategic retrenchment which began in June, said Gao Xiang, a spokesperson for Nokia China.

Gao did not say which divisions of the factory have been involved in the layoff, but noted that the Dongguan factory is an important part of Nokia Corp and will continue to focus on the development of feature phones which mainly refer to mobile devices with Symbian OS, a lower-end operating system compared to Apple's iOS, Google's Android and Microsoft's Windows Phone 7.5.

Nokia Corp has confidence in China's two main factories, with the Dongguan-based factory developing feature phones and a Beijing-based one developing smartphones like Lumia 900, he said, refusing to make comments on whether there will be further job cuts in Nokia China.

According to Nokia's second quarter 2012 interim report published on July 19, the company headquarters introduced a range of measures including "reductions within certain research and development projects, consolidation of certain manufacturing operations and divestments" in June, aiming to reduce costs and make the company profitable again.

A cut of some 1.6 billion euros ($2 billion) in expenditures and a reduction of 10,000 positions are expected worldwide by the end of 2013, said the report.

Under such expectations, the layoff at Dongguan factory was neither the first one nor will be the last one in China, as Chinese labor costs are increasing and sales of Nokia devices are sluggish around the world, said Wei Guangju, an industry analyst at the Beijing-based Adfaith Consulting.

On July 26, Nokia began to cut jobs at its Beijing-based research center, following the consolidation of its Chinese distribution centers in July.

Sales of Nokia devices and services in the second quarter of 2012 decreased 5 percent quarter-on-quarter and 26 percent year-on-year, with a 41 percent drop year-on-year in the Chinese market.

Some experts noted that the layoff at the Dongguan factory signaled Nokia's gradual transition from feature phone manufacturing to smartphones.

"Feature phone is doomed to disappear, as smartphone is the new trend. Among the giant international handset makers, only Nokia largely maintains its feature phone manufacturing operation now," said Wang Ying, an industry analyst at Beijing-based consultancy Analysys International.

Nokia needs to urgently complete this transition as the market demand for feature phones is decreasing sharply, Wang noted.

According to data from Analysys International, in the second quarter of 2012, mobile devices with Symbian OS held 6 percent of China's mobile market, with an average price of 1,170 yuan ($186.7).

But Wei from Adfaith noted that Nokia will not give up feature phone immediately as the company still gained most of its profits from it.