How Nokia's Lumia hopes carry the weight of a nation

How Nokia's Lumia hopes carry the weight of a nation

Summary: Finland, competitively speaking, is on fire, according to the World Economic Forum, but does its deep and lengthy dependence on Nokia leave it skating on thin ice?

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The World Economic Forum (WEF) 2012-13 Global Competitiveness Report (PDF) attempts to shed light on each country's competitive standing, in terms of its productivity and prosperity.

Lumia 820
Nokia - and Finland - are pinning their hopes on its new Lumia phones. Image: Sarah Tew/CNET News

Finland is doing very well on all counts, according to the WEF, which placed the Scandinavian country ahead of last year's third runner, Sweden, and just behind the respective first and second placed nations, Singapore and Switzerland.  

The "pillars" holding up Finland's competitive standing are its "well-functioning and highly transparent public institutions", ethical private institutions, and excellent healthcare and education system, according to the WEF, with the latter laying the groundwork for further innovation and technological adoption.

But how did these institutions come to be in such a good state in the first place, and where will the spending on future innovation come from?

According to a recent study (PDF) by the Research Institute of the Finnish Economy (ETLA), which also contributed to the WEF's report, a great deal of it came from Nokia.

A taxing problem

In 2008, Nokia accounted for nearly one percent of national employment in Finland, 37 percent of its spend on R&D and half of its business sector's R&D spend. ETLA points out that R&D was 3.4 percent of GDP in 2008 — and if Nokia were removed, it would fall to about 2.4 percent.

Its corporate tax contributions are equally impressive. In 2008, Nokia's contributed nine percent of Finland's corporate taxes, but as The Economist noted recently, it was as high as 23 percent in the decade up to 2007.

Nokia's total tax payments, as outlined in its annual reports, are an imprecise indication of its contribution to Finland's coffers, but they highlight scale of the decline in its payments — from €1.1bn in financial 2008, to €702m in 2009, €443m in 2010, and €209m in 2011.

Nokia Salo
Nokia's facilities in Salo, which closed this year. Image: Nokia

At a local level in Finland, Nokia's tax payments are even more noteworthy — they account for 95 percent of the €60m corporate taxes paid in Salo — a city in the south-west of Finland where Nokia had a significant corporate presence — in 2010. The city's total tax revenues will likely dwindle to €10m next year as a result of Nokia's aggressive cutbacks in the city.

As The Economist points out, Nokia's 2011 revenue as a percentage of Finland's GDP (20 percent), its large share of the country's patents (27 percent last year) and employment, lands Finland with a problem unique in the world — its economy depends to a large extent on a single company.

Big in Finland

While there are other nations where individual companies play an important role, none do the same degree of heavy lifting. Taiwan's Hon Hai had a similar revenue-to-GDP ratio last year, but it only contributed to eight percent of the nation's patents, while many of its staff were located in China. Samsung's revenues, double Nokia's, only accounted for 10 percent of South Korea's GDP in 2011, indicating the nation's economy was more diversified. 

Similarly, ETLA notes the importance of Ericsson's and Philips' patents to Sweden and Netherlands respectively, but Ericsson is less dominant in Sweden's economy while Philips' business covers a range of technologies. 

"Nokia instead is very dominant in Finland and is very specialised in a limited number of technologies," the report says. 

It would seem there is a lot more riding on Nokia's newly-released line of Windows Phone 8 devices than just Nokia's own future. Perhaps in future WEF will need to include a 'dependency' index to identify whether a nation is vulnerable to the collapse of a single company.

Topics: Nokia, Mobility, Patents, Smartphones, EU

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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16 comments
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  • Well sine Nokia no longer manufactures phones.

    All they could possibly make is infrastructure hardware. Nokia close it's phone manufacturing, and simply puts their name on phones designed, and built by Foxconn.
    Troll Hunter J
    • Nokia

      still designs the phones
      theoilman
      • Re: Nokia still designs the phones

        Not really. They have to conform to Microsoft’s strict specifications. That’s why all Windows phones tend to look alike.
        ldo17
        • Thats a stretch

          Thats a big stretch mate. You cant say that Microsoft has strict standards, because as of WP8, the majority of those were removed. The only reason they were there previously is because the underlying Kernel couldnt actually support the increases in hardware.
          Master_T[RG]
        • Re: Nokia still designs the phones

          Yes, all phones tend to look the same since they all have four sides and rounded corners. Just like Samsung phones and iPhones look alike because they have the same four sides and rounded corners.
          petin_y@...
  • I like Finland's flag...

    that's about it :)
    dtdono0
    • I like

      that they have reindeer
      theoilman
      • and hot saunas

        and women too!
        LlNUX Geek
  • poor Finland nation

    Nokia is going down bcz of that moron Elop and MS, they are checkmated no way to save them even if they fake one photo or two!
    L3thargic
    • Elop or no Elop

      Nokia couldn't just keep going the way they were going- they needed a drastic change and Meego wasn't going to cut it (IMO). Did Elop do the right thing singing on to do whatever MS said? I don't know. But by selling off old has-been parts of the company that they should have gotten rid of long ago, and with Lumia sales climbing, they are on the way to profitability again. Nokia was a great company that got bloated and fell behind the times, and they're changing that.
      theoilman
      • *signing

        not singing
        theoilman
      • ... and Meego wasn't going to cut it ...

        Except Meego managed to outsell their entire Lumia range during its brief time on the market.
        ldo17
        • MEEGO IS DEAD

          so get over it.
          petin_y@...
          • Re: MEEGO IS DEAD

            No, it is Windows Phone that is dead.
            ldo17
  • carrige ahead of a horse

    "well-functioning and highly transparent public institutions, ethical private institutions" - in plain English it means that the population is not inclined to steal. This is what puts Finland on top. Nokia's tax dollars admittably help to pay for the excellent medical care and education, but it is the people who makes the coutry, not the technology.
    ForeverSPb
  • Back to basics (in Economics)

    Nokia as a world wide corporation may have revenues 20% of Finnish GDP but it is a completely different thing how much Nokia contributes to Finnish GDP. In fact, in 2009 it was 1.6% and by now probably less than 1%.

    Another example: Toyota has several manufacturing plants in the US. Is all the added value that they generate counted to the Japanese GDP just because the parent company happens to be Japanese? Obviously not!

    I guess there is a valid reason why Liam moved from economics to journalism.
    Wilhelmi