Nokia plans changes to its manufacturing operations

Published by Steve Litchfield at 9:57 UTC, February 8th 2012

Nokia has announced planned changes at its factories in Komarom (Hungary), Reynosa (Mexico) and Salo (Finland), to "increase efficiency in smartphone production". These three factories will now focus on "smartphone product customization" and device assembly is expected to be transferred to Nokia factories in Asia, where the majority of component suppliers are based. Around 4000 employees will ultimately be lost.

"Smartphone product customisation" is a reference to the increasingly complex process of providing software variants for different countries and operators. Effectively this means a physical device will arrive, at one of these factories, from Nokia's Asian assembly lines as a blank slate. It will then be customised as appropriate. While the main focus will be on software, there may also be variations in the in box accessories, documentation and related material. In some cases a small amount of additional assembly may also be carried out (e.g. fitting a certain colour casing).

A typical Nokia device has several hundred different versions (product codes), with the main changes being made in the software. Building, testing and deploying these variants is a complex process. Being able to rapidly customise and deliver devices is a key competitive advantage and ties in with Nokia's stated aim of being operator friendly.

In its press release Nokia specifically mentions the benefit of reduced transport costs and reduced time to market by locating assembly lines closer to their component suppliers, but reduced labour costs will also be a major portion of the anticipated increased efficiency in smartphone production. 

Moving the core manufacturing operations to Asia is not a surprise; Nokia has been something of an odd man out by maintaining global manufacturing facilities. However, it will still be seen as a blow to the pride of Nokia, and continues a pattern of painful adjustments as the company continues its strategy transition.

Most of the manufacturing will move to Nokia's plants in Beijing (China) and Masan (South Korea), but some may also be relocated to Dongguan (China), Chennai (India), Manaus (Brazil) and Hanoi (Vietnam).

The severity of the 4,000 job losses is made clear by their impact on each plant - Komarom (2,300 out of 4,400 jobs), Salo (1,000 our 1,700) and Reynosa (700 out of 1,000). Employees who lose their job will be supported a locally-tailored program that will include financial support and assistance withe local re-employment.

From the press release:

"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 Savander. "We recognize the planned changes are difficult for our employees and we are committed to supporting our personnel and their local communities during the transition."

As a consequence of the plans, the number of steps in manufacturing and the amount of work carried out at the sites in Komarom, Reynosa and Salo are expected to decrease substantially. The changes are anticipated to impact approximately 4,000 employees in total.

Personnel reductions are planned to be phased through the end of 2012. Nokia will offer a comprehensive locally-tailored support program, including financial support and assistance with local re-employment.

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