To counter the rupee's slide against the dollar and boost profit margins, Nokia is now looking to buy critical components such as display screens and batteries locally for its India operations.
As part of a plan to significantly increase domestic sourcing, the Finnish telecom major has asked its key vendors from South Korea, Japan and China to tie-up with Indian firms. This is expected to help lower input costs for the over-20 phone models made at its Chennai plant and will also likely benefit its eight other plants overseas, which would be able to source components from India at a cheaper price.
“Up to 70-80 per cent of the components are imported, so there is a lot of room to go after. We're talking with our suppliers in China, Japan and South Korea to form joint ventures with domestic firms,” said Mr Prakash Katama, Operations Director, DSNM (Demand Supply Network Management), Chennai Factory.
The 20-30 per cent components sourced locally include plastic/rubber parts such as covers and key mats, apart from antenna, print/packaging and chargers.
A weak rupee and high dependence on import content in the information and communications technology and auto sectors has led to around a 15 per cent squeeze on margins, Nokia India Managing Director, Mr D Shivakumar said without mentioning the specific impact on the handset maker.
Capacity
Nokia may also need to soon look for more land for expanding production, as its Chennai facility has little room for expansion left.
“We have done two expansions at the plant and it has hit the end – there is no more land. At maximum we can expand capacity 10-15 per cent through efficient production,” said Mr Katama.
Company officials, however, did not elaborate on the matter when asked for details.
Till now, Nokia has invested $300 million at the 210-acre plant. With production of over 500 million units in six years, this is the largest Nokia production facility. It employs 9,000 people, 70 per cent of whom are women.