Nokia Eliminates Contract Manufacturing

Nokia, the world's largest mobile handset supplier, has announced that it has stopped using outside manufacturers for assembly of its cellular telephones. This represents a loss of $5 billion in business for contract manufacturers. The firm attributed the change to weak global demand for mobile devices. In 2008, Nokia outsourced approximately 17 percent of the manufacturing volume of its mobile telephone engines, which include the phone and software that enable its basic operations.

According to Adam Pick, Principal Analyst for Electronics Manufacturing Service (EMS) and Original Design Manufacturers (ODM) at market research specialist iSuppli Corp., "Amid the global economic recession and slowing sales of mobile handsets, Nokia in recent months had begun the process of shifting some of its assembly operations away from contract manufacturers and back inside the company. However, this announcement clearly illustrates just how severe the situation in the mobile handset market really is." Pick added that "Nokia's pull-back will shed more than $5 billion in revenue from electronics contract manufacturers. That most means more overcapacity, more headcount reductions and, obviously, more problems."

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