Would Nokia really commit to what they have said when applying for investment license in Vietnam if it is facing big difficulties in home country Finland? That is the question running through people’s minds as the Finnish Nokia group released dissapointing news when giving a higher predicted loss level for the second quarter of the year.
It has also announced the plan to lay off 10,000 workers, shut down many factories and research and development (R&D) centers in Finland, Germany and Canada.
Nokia has also reached an agreement on selling the luxury brand Vertu to Swedish EQT Partners at 200 million euro, or 250 million dollars.
According to The Financial Times, Nokia would have to sell a lot of its assets to get money to restore the mobile phone production unit which is now on the verge of bankruptcy, amid the hard pressure of the stiff competition on the smart phone market. Nokia now has to struggle with many redoubtable rivals, especially Apple and Samsung.
Nokia has lost 70 billion euro or 88 billion dollars worth of the market value since the day Apple launched its iPhone series into the market in 2007. In order to regain the market share from Apple and Google’s Android-based products, Nokia decided to market the smart phone products using Microsoft’s operation system Windows.
However, the sales of the smart phone versions have been tragic, which, according to Bloomberg newswire, has led to the 10 percent price decrease of Nokia’s shares to 2 euro per share.
The current big problems Nokia is facing have given reasons to Vietnamese people to worry about the plan on building a factory in Vietnam.
Nokia plans to set up the factory, which specializes in making normal popular mobile phone products, in VSIP industrial zone in Bac Ninh province.
The construction of the 302 million dollar factory was kicked off two months ago, while it is expected to become operational by early 2013. By that time, the factory would churn out 180 million products a year and generate 10,000 jobs.
The factory in Bac Ninh would be the first Nokia’s factory in South East Asia and the 11th mobile phone production base of the group in the world. It is expected that most of the products of the factory would be exported, which the exports accounting for 80 percent of the total output in the first year of operation.
The figure would rise to 92 percent in the next year and then to 95 percent one year later, when the factory enters the stable production phase.
The move by Nokia of choosing Vietnam for its production base is believed to be a part of the group’s plan to shift its production focus to Asia in order to take full advantage of the cheap labor force.
Mary McDowell, Deputy President of Nokia has said that the new factory would provide products to newly emerging markets at reasonable prices.
The government of Vietnam has offered big investment incentives to Nokia as a hi-tech enterprise. In return, Nokia has also made commitments in some issues relating to the turnover, the number of workers for R&D and wages.
As such, Nokia’s factory in Vietnam would focus on making popular products, the market segment which remains safe and uninfluenced by the smart phone market.
However, people still have every reason to worry about if Nokia is now capable enough to fulfill its commitments.
Trinh Thanh Lam, General Director of CMC P&T, a subsidiary of CMC technology group, believes that in the immediate time, the factory in Vietnam would not be affected. However, in the long term, Nokia’s global business strategy would be adjusted considerably, because the market of popular products is believed to fall into the hands of Samsung.
