Microsoft moves Nokia manufacturing from China to Vietnam

Microsoft moves Nokia manufacturing from China to Vietnam

Summary: Microsoft is aligning Nokia's operations in markets where Windows Phone is successful. Lower costs in Vietnam relative to China are also a nice incentive to move manufacturing. Brazil and Mexico sites also get a bump.

SHARE:

Amid a large restructuring of its Nokia unit, Microsoft is also joining many technology companies moving manufacturing from China to Vietnam. Microsoft is also moving operations to Brazil and Mexico.

Microsoft on Thursday said it will lay off 18,000 employees, with many of them being factory workers in China. According to Stephen Elop, chief of Microsoft's devices unit, the software giant will move its device manufacturing and marketing operations to markets where Windows Phone has some traction.

Elop said in an email to employees that Microsoft will scale back engineering efforts in Beijing, but keep a team focused on affordable devices.

As for manufacturing, Microsoft's Nokia unit is swapping China for Hanoi, Vietnam, Brazil and Mexico.

Elop said:

"We plan to right-size our manufacturing operations to align to the new strategy and take advantage of integration opportunities. We expect to focus phone production mainly in Hanoi, with some production to continue in Beijing and Dongguan. We plan to shift other Microsoft manufacturing and repair operations to Manaus and Reynosa respectively, and start a phased exit from Komaron, Hungary.

In short, we will focus on driving Lumia volume in the areas where we are already successful today in order to make the market for Windows Phone. With more speed, we will build on our success in the affordable smartphone space with new products offering more differentiation. We’ll focus on acquiring new customers in the markets where Microsoft’s services and products are most concentrated. And, we’ll continue building momentum around applications."

Microsoft isn't the first tech giant to scale back its China manufacturing. To wit:

What's happened to China is simple. There's a middle class emerging and wages are going up. A factory worker in Hanoi makes $145 a month compared to $466 in Beijing, according to the Japan External Trade Organization (JETRO). Electricity and water costs are also lower in Hanoi. Meanwhile, Vietnam is aggressively courting technology companies and plans to have 30 percent of its industrial product deriving from high-tech. 

factoryworkers
Worker's monthly salary base

Topics: Hardware, Microsoft, Tech Industry

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

20 comments
Log in or register to join the discussion
  • Hadn't really thought about it...

    But it makes sense. China has not been very favorable to MS...

    I don't see this as doing very much either way. Nobody really wants WP.

    Of course, there is a downside to this.

    How are they planning to handle the next natural disaster that affects Vietnam every 5 years or so - the floods caused major price increases in disks - I think this effect lasted almost two years..

    A fire at a single plant raised prices of memory chips for a year.

    So now, an event could take out all Windows phones?
    jessepollard
    • Yawn.

      Zzzz. Zzzz. Zzzz.....
      William.Farrel
      • Oh!.... you said something?

        Oh right - you figured out all the downsides, ones where nobody actually in the biz for years thought of.

        You woke me up for that drivel?
        William.Farrel
    • The floods were in Thailand, not Vietnam

      FYI
      Rabid Howler Monkey
    • Someone wants WP

      If nobody did, then that's what would have been discontinued instead of Nokia X. I'm sure that at the very least, WP is popular with MS executives and board members.
      John L. Ries
    • Hmmm

      Natural disaster in Vietnam? They are prone to typhoons but China has their own issues. B'sides you forgot Brazil and Mexico. They don't say which country will work on the phone - Mr. Anti-Microsoft. And any company would be dumb to keep all the manufacturing at one location. Remember when Western Digital's production dropped because of flooding in Asia a few years back? They still had at least one unaffected plant. Just a lesser output.
      Gisabun
  • Interesting

    Now I understand why China disclosed Microsoft's Android related patents. It was likely a response to this move.
    Shank104
    • So how did the Comrades find out in advance?

      Spies in Redmond? I'm sure the Chinese managers found out shortly before we did.
      John L. Ries
    • Doubt it

      The Chinese propaganda against Microsoft and Apple is all about the U.S. claims of Chinese government sponsored hacking for economic espionage. It's the same tit for tat nonsense that's been going on since the end of WWII.
      Buster Friendly
    • doubtful

      I doubt it. Rather, with Android being open source, anyone can make Android phones. By undermining Microsoft's Android patent portfolio, the Chinese government opens the door to Chinese companies producing cheap phones with no licensing fees being paid outside of China itself. That's of far more important benefit to Chinese industry than the presence of Windows Phone manufacturing facilities.
      dsf3g
  • Final Frontier

    Vietnam should be about the Final frontier for companies looking for cheap labor.
    tbanks204
    • Well, there's always

      that previously undiscovered tribe that just emerged from the Amazon...
      William.Farrel
      • cheaper

        There's always cheaper labor somewhere. As soon as Vietnam starts maturing economically and wages rise there, too, manufacturers will start looking elsewhere for dirt cheap labor. All they really need is political stability (probably a non democratic autocracy with firm control over the country's military) and millions of very poor potential workers.
        dsf3g
        • Dictatorships are inherently unstable

          That's why they need to suppress dissent to keep from being overthrown (those are resources that come from somewhere).

          In Machiavellian terms, every military strongman and is a new prince; and Communist General secretaries serve at the pleasure their respective Central Committees, unless steps can be taken to suppress dissent in the ranks (Stalin's trick; Khrushchev was fired anyway).

          The only truly stable authoritarian regimes are traditional monarchies.
          John L. Ries
    • Nope

      I'm sure companies will find aliens from some world and bring them here.
      Gisabun
  • Myth of cheap labor, yet one more mistake MSFT makes

    A badly-managed company seeks to become profitable by going cheap, including layoffs. This always backfires. We are awash in our landfills with products that don't work, because they are too cheaply made. Every day mistakes are made by consumers, thinking that if product A is cheaper than B, it must be better. That's not logical, nor possible.

    THINK about your own life: you have to make a certain amount of money to live a life of sufficient quality to make it worthwhile. Same for any product. It has to be made well enough, to become worthwhile for usage. Granted, economies of scale and other savings can reduce the cost, but one must be very careful about cutting costs in ways that reduce quality.

    Too many companies, like consumers, just apply non-discerning criteria to cost-cutting, with disastrous results. One of the reasons MSFT's products have been so bad for the past 11 years, is that they chose to cut costs of labor by importing it, rather than hiring domestically. So, the code became worse and worse, the oversight also, resulting in the debacle MSFT faces today.

    So you'd think they would wake up and smell the coffee, rather than apply the same failed practices of the past 11 years. But they don't.

    Not merely MSFT makes that error, but companies everywhere. Just like consumers, they don't THINK through the necessity of a given minimum cost to get a quality product.

    And this stupidity will continue. We learn from history that we learn nothing from history.
    brainout
    • Put your brain back in; you don't make any sense whatsover......

      especially when the company that is not 'doing so well', like you claim for Microsoft, is earning a whopping $6-$7 billion per quarter. That's close to 1/3 to 1/2 more profits than Google, who I'm pretty sure you would claim is a huge success.

      So, either put your brain back in, or stop the nonsense altogether. A brain is a terrible thing to waste. ;)
      adornoe@...
      • Yep

        Yep, that's the difference between people that read headlines and those that read annual reports and balance sheets. Google is on the smaller side in the big tech game and certainly not the most profitable in absolute terms or margin. Microsoft has had consistent strong growth and is (I think) currently the most profitable as percentage of revenue, but I'd have to go check to verify that.
        Buster Friendly
    • You really haven't a clue as to what you're talking about, do you?

      Either that or you're one big parody; the joke, brainout, as in "speaking without a brain".

      That has to be it.

      Seriously, consumers thinking "that if product A is cheaper than B, it must be better"? Apple? BMW? Yeah, people spend all that extra money because they're looking for a poorly made car or computer.

      Face facts - you have an irrational hatred of MS, and it taints you're view to the point of being ridiculous, likely out of a mixture of fear and envy.
      William.Farrel
  • Political or economic?

    Based on the Huawei scandals of state-sponsored / state-demanded backdoors, it's a good move on the part of Microsoft to remove their manufacturing from where those entities are most likely to impose sneaking one in. This of course also addresses the economic changes where the worse the US does, the stronger China gets and the more expensive their services become.
    ct2193@...