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