Nokia kicks off largest project
( 2001-12-21 10:53 ) (1 )

Mobile phone maker Nokia formally launched its largest production base in China on Thursday and promised to inject additional investment to make its project in Beijing a multibillion-dollar venture in the coming years.

The Xingwang (International) Industrial Park, which incorporates Nokia's mobile phone plant in Beijing and 15 of its international component suppliers, involves an initial investment of around 10 billion yuan (US$1.20 billion) and will be the largest single foreign-funded project in Beijing.

Nokia said Xingwang's annual sales volume is expected to reach 50 billion yuan (US$6.02 billion) and contribute 15,000 job opportunities.

At Thursday's opening ceremony, Nokia announced plans to expand the park to 100 hectares, doubling the current area, and to invite an additional 15 to 20 partners to Xingwang.

"That means the total investment will soon double the current 10 billion yuan (US$1.2 billion)," said Antti Ware, vice-president of Nokia (China) Investment Co Ltd and general manager of Beijing Nokia Mobile Telecommunications Ltd, Nokia's own plant in Xingwang.

Nokia's Chief Executive Officer Jorma Ollila signed a memorandum with Beijing Mayor Liu Qi for Phase II construction of the park on Thursday.

Since it remains unclear whether the world's telecom industry has hit the bottom or not, Nokia's bold investment plan in Xingwang reveals that the company continues to bet on the wireless market and its robust demand in China.

Xingwang park is a unique production base because it incorporates Nokia's own plant and suppliers to form an efficient manufacturing network that helps reduce costs, control inventory and consolidate relationship with its partners.

In the current situation, in which an oversupply of wireless phones and a global slump in demand for telecom gear have dragged down sales, efficient production management becomes even more important.

The past 12 months have been a hard time for mobile phone makers. Nokia, Motorola and Ericsson, the three leading mobile phone companies, have all cut back their workforces and lowered their sales forecasts. Ericsson has transferred its independent production of phones to a Singporean company, and Motorola has expanded its outsourcing contracts to save costs.

But Nokia insists on producing its handsets independently.

Local analysts believe Xingwang will help strengthen Nokia's presence in the Chinese market. China, especially after its accession to the World Trade Organization, has become strategically more important for telecom companies, but challenges remain for the Finnish company to make Xingwang profitable and to increase its market share in China.

"The launch of Xingwang park is a direct result of China's fast-growing wireless market," said Liu Chijin, vice-president of Nokia (China) Investment Co.

In August 2001, China replaced the United States to become the largest mobile phone market in the world with 130 million subscribers.

That figure will top 250 million in 2005 and 340 million in 2007, according to Nokia's forecast.

But competition here will also be the toughest in the world as almost all the multinational handset makers gear up to get a bigger share. In addition, Nokia will face a strong challenge from China's home companies, which are late comers to the mobile phone market but understand consumer demands better than international firms.

Xingwang will also target international markets, Liu said. Income from exports will account for more than half of the total revenues from Xingwang.

Beijing Nokia Mobile Telecommunications Ltd exported US$860 million worth of products in 2000 and has been Beijing's largest foreign-funded company for three consecutive years. Phones produced by the plant have been sold to countries in Southeast Asia and the European Union.