Nokia stops outsourcing

Global - Nokia's decision to stop using subcontractors could cost subcontractors as much as US$5 billion in revenue, says researcher iSuppli.

Nokia said it stopped outsourcing the manufacturing of its mobile phone engines, including the phone and software that enable its basic operations, in response to dwindling customer demand.

"What we have done due to a change in market situation is that we have gradually reduced the amount of engine assembly by subcontractors," Nokia spokesperson Eija-Riitta Huovinen told AFP. "We have the ability to produce these engine products within the company," she said, adding that when demand picked up again Nokia is in a position to quickly rebuild its subcontractor network.

The move is expected to cost these subcontractors some US$5 billion in revenue, said iSuppli.

"This announcement clearly illustrates just how severe the situation in the mobile handset market really is," iSuppli analyst Adam Pick said in a statement.

The overall mobile phone market is expected to contract by about 10% this year, hurt by flagging consumer spending, iSuppli said.