According to the South China Morning Post, Finland’s Nokia will close most of its departments in China by the end of this year and lay off local employees in stages. After entering the Chinese market for more than 40 years, the reason for the decision to exit was fierce competition.
Image source: Nokia
Employees in Nokia’s China unit responsible for mobile networks and general network infrastructure will be laid off. Most of the job cuts should be completed by the end of the year. As of the end of last year, Nokia had about 7,200 employees in China, Hong Kong and Taiwan. There is no data yet on how many of them will lose their jobs in China. The company has representative offices in five major cities in China, including Beijing and Shanghai.
Nokia headquarters talks about its plans in this area shared A regular video conference with the Chinese representative office was held just this month. Experts explained that only Nokia’s after-sales equipment experts will stay in China, which is equivalent to gradually withdrawing from the local market. Employees of Nokia’s China department who have been laid off explained that their severance pay amount is calculated using the “N+3” formula, that is, three months’ salary is added to the number of years of service (N). Some Nokia employees in China were transferred to work at the Finnish headquarters.
Nokia’s Hangzhou Research Center alone employs about 1,600 people. Most of them are likely to lose their jobs. In its official comments, Nokia simply pointed out that its business in China has been declining for a long time and that it must adjust the scale of its local operations to adapt to the new reality. A Nokia representative declined to comment on the local office closures and layoffs.
Since 2019, Nokia’s revenue in China has almost halved to 913 million euros, with the region’s share of the company’s global revenue falling from 7.9% to 4.6%. The company has been operating in China since 1985 when it established a representative office in Beijing. In the 1990s, it actively participated in the construction of the national communications network infrastructure, and the brand’s mobile devices were popular in the local market. By 2010, China had become Nokia’s largest market, with revenue reaching 7.62 billion euros. In recent years, during the expansion of 5G communication networks, Nokia’s market position has been rapidly lost to Chinese companies Huawei Technologies Co., Ltd. and ZTE. Nokia has had exclusive ownership of its Chinese subsidiary since the end of last year, buying shares in the company from Huaxin; the integration of the business will cost the Finnish company 350 million euros this year alone. In the future, Nokia hopes to save 200 million euros per year through this restructuring. The company expects to complete the integration of its Chinese subsidiary within a few years – sooner than originally planned.
Nokia is not the only Western company recently forced to cut back on its presence in the Chinese market. IBM, Microsoft and Amazon already do this to varying degrees. In many cases, increasing competition and the import-substituting direction of Chinese infrastructure have left them with little choice.
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