Nokia pulling all OEM contracts?

iSuppli, of all companies -- you know, the teardown people -- is reporting that Nokia has stopped using outside contractors altogether for manufacturing its hardware. Nokia has always had a good deal of in-house manufacturing capability, but certain products -- including its upcoming MID, allegedly -- have been contracted out to ODMs like Foxconn and its contemporaries, so this calls a whole slew of initiatives into question. Notably, many of its recent CDMA devices are made outside of Nokia proper, so we've got to wonder -- does this mean they'll be taking up the slack internally, or is CDMA once again on the outs for these guys? See iSuppli's full press release after the break.

[Image via Unwired View]

El Segundo, Calif., Mar. 27, 2009-In another blow to the beleaguered electronics contract manufacturing business, Nokia-the world's largest mobile handset brand-announced that it has stopped using outside contract manufacturers for the assembly of its phones.

The company cited weak global demand for mobile devices as the reason it will cease employing outsourced production to Electronics Manufacturing Service (EMS) providers and Original Design Manufacturers (ODMs).

"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," said Adam Pick, principal analyst for EMS/ODM at iSuppli Corp. "However, this announcement clearly illustrates just how severe the situation in the mobile handset market really is."

Nokia in 2008 outsourced approximately 17 percent of the manufacturing volume of its mobile phone engines, which include the phone and software that enable its basic operations, to providers including Foxconn International Holdings, BYD, Elcoteq and Jabil Circuit.

"This doesn't help the eroding EMS/ODM industry," Pick continued. "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."

iSuppli's current forecast calls for the EMS/ODM market to contract 9.9 percent in 2009 to reach $270.8 billion, down from $300.7 billion in 2008. However, given Nokia's announcement, iSuppli will downgrade its forecast for 2009 and the following years.

The attached figure presents iSuppli's current global EMS/ODM revenue forecast.

While the announcement is bad news for the contract manufacturing and mobile handset businesses, it represents a positive commentary on Nokia's capability to adjust to changing market circumstances.

"Nokia is an operational juggernaut with leading procurement and supply chain techniques," noted Jeffrey Wu, iSuppli's senior EMS/ODM analyst. "You have to give Nokia credit for maintaining a hybrid manufacturing system that adjusts pursuant to volatile demand patterns."

[Bandigolo Posted Mar 27th 2009 5:15PM]

How many of these OEM contracts involve U.S. corporations and/or U.S. labor?

[(Unverified) Posted Mar 27th 2009 6:07PM]

likely very few. most phones are manufactured in Tiawan, Singapore, China, or the Philippines.

[(Unverified) Posted Mar 27th 2009 7:18PM]

Well jabil is a major oem for nokia but I dont know if it has any factories in the US producing nokia components.

[fernando Posted Mar 27th 2009 5:20PM]

I, for one, welcome our vertically integrated overlords.

[(Unverified) Posted Mar 27th 2009 5:57PM]

ಠ_ಠ

[madmaxmedia Posted Mar 27th 2009 5:26PM]

I hope iPhone girl will be okay...

[BFish Posted Mar 27th 2009 5:26PM]

I wonder what¨s the iSupply role in this news, it was on main finnish newspaper on 26th morning and coming directly from Nokia: (in finnish) http://www.hs.fi/talous/artikkeli/Nokia+lopetti+alihankkijoiden+k%C3%A4yt%C3%B6n+puhelinten+valmistuksessa/1135244604689

[Shravan Posted Mar 27th 2009 6:29PM]

I think the 5800 NAM 3G issue had something to do with this.

[(Unverified) Posted Mar 28th 2009 8:26AM]

Definitely.

After the 3G reception and speaker issues something had to be done.

[KarlW Posted Mar 27th 2009 7:00PM]

iSuppli is actually a market research firm. They do occassional teardowns of popular products to estimate productions costs. It's all from a business perspective.

Not to be confused with iFixIt, which disassemble and supply replacement parts for Apple devices.

[zephxiii Posted Mar 27th 2009 7:03PM]

*YAWN*, Not that CDMA Nokias were worth a damn anyways, ESPECIALLY verizon ones.

[(Unverified) Posted Mar 27th 2009 8:48PM]

Maybe now they wont have crappy build quality that's become a staple for their high priced N-Series devices. Wobbly sliders, light leakeage, d-pads falling off, etc. I expect a device with impeccable build quality (ala E-seriea) for the price these things go for.

[jcar302 Posted Mar 27th 2009 11:59PM]

Ya i agree.
I'm a huge nokia s60 fan, but seems like everything i get has some sort of problem.
If they want to compete, they really need to get quality control in order.
My n73 bricked during an update
My n78 had camera and gps issues
Now my e71 has a bad speaker

Honestly, i paid too much for these phones to have all this happen.
My soon to be purchased 5800 (as soon as internet radio is available) will be the last straw, I'll give the 5800 a try, but one flaw, and that's it for nokia and I.
Nokia is just lucky i like the s60 setup, i don't like contracts, and i like nokias unlimited features that aren't held back by ATT, like they are on the iphone.

[(Unverified) Posted Mar 27th 2009 11:24PM]

what phone is that?

[Sam of the Sun Posted Mar 28th 2009 5:12AM]

It isn't.