Finland-based Nokia Corp. announced today that it will discontinue assembly of its cellphones in Europe by end of 2012 and move production to Asia in order to better compete with the likes of Apple and Motorola.
Nokia officials said the move made sense given that “labor costs, land costs and other associated costs are so much lower in Asia.” The move will bring Nokia closer to its “biggest pool of users” in Asia, and it’s hoped that locating nearer the supply chain will help products reach the intended market faster. “From a supply and demand side Asia looks a lot more attractive than Europe,” Nokia said.
Nokia is the latest in a long string of high-tech companies relocating manufacturing to Asia.
Early last year, Barack Obama paid a personal visit to some of Silicon Valley’s top companies, one of which was Apple. Over dinner, President Obama was rumored to have asked Steve Jobs: “What would it take to make iPhones in the United States?” To which Jobs reportedly replied: “Those jobs aren’t coming back.”
Almost all Apple products are manufactured in Asia. Why? Because it offers a flexible, plentiful and cheap workforce that, at least in the high-tech arena, is often more highly skilled and diligent than anything you can find in the United States.
But the Asia-attraction is about much more than simply cheap labor. For high-tech companies the bottom line is often driven by supply chain, and countries like China rule the roost in this respect. Parts are often manufactured in factories next door to one another, and components are readily available in bulk.
In a recent New York Times article Timothy D. Cook, who replaced Steve Jobs as chief executive last August, said one of the reasons for locating manufacturing in Asia is the ability of Asian factories to “scale up and down faster.”
The New York Times gives this example from Apple: “For years cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve.” On the lookout for a cutting plant which could easily be scaled, Apple settled on a factory in China because it was able to offer “a warehouse filled with glass samples free of charge, engineers at almost no cost, and on-site dormitories so employees would be available 24 hours a day.”
On top of this, the Chinese government subsidizes many of its industries, making them stronger competitors for contracts, and tax breaks and less regulation incentivize U.S. and European businesses to put down roots in Asia.
Do you think Steve Jobs was right about high-tech manufacturing jobs never coming back to the U.S.? Is Europe experiencing the same trends on the same scale?