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Nokia opens handset unit in India

The plant in Sriperumbudur is the Finnish giant's fourth handset factory in Asia and 10th globally.

india Updated: Mar 13, 2006 12:34 IST
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Top handset maker Finland's Nokia opened its first Indian handset factory on Saturday in a bid to increase its stranglehold on the world's fastest growing wireless services market.

Ultra low cost phones, costing less than Rs 2,000 ($50), are fuelling demand in cost-sensitive India, where more than 4 million new users are entering the 85.4 million strong wireless sector each month.

The number of mobile services users surged 47 per cent in 2005, and now exceeds the popion of Germany. India is expected to be the world's third largest mobile market by the end of this year, behind China and the United States.

"We anticipate that there will be a long-term sustainable demand for mobile telephony in the fast-growing Indian market," Chief Executive Jorma Ollila said at the launch of the plant in Sriperumbudur, on the outskirts of the southern city of Chennai.

"I am confident that our manufacturing facility in Chennai will enable us to reduce our time to market."

Nokia plans to invest about $150 million in its India plant, which will support growing demand for handsets and network infrastructure in the Asia-Pacifc region.

Nokia said its two suppliers, Aspocomp group and Perlos Corp , will invest $70 million and $12 million respectively to set up a printed circuit board facility and a mechanics factory.

The plant in Sriperumbudur is the is the Finnish giant's fourth handset factory in Asia and 10th globally and Chennai is fast becoming a magnet for high-end hardware manufacturing.

More than 53 million handsets are expected to be sold in Asia's third largest economy in 2006, up from 31 million last year. local mobile call -- are driving the market where the user base is expected to rise to 278 million by 2010.

Nokia, which competes mainly with Samsung Electronics, LG Electronics Inc and Motorola Inc, in the cut-throat Rs 107 billion ($2.4 billion) handset market, easily has more than half the market.

Analysts at market research group iSuppli expect the size to more than double to $5.8 billion by 2010. At the moment the phones market depends almost exclusively on imports.

Both LG and Samsung have plants that are already operational in the country, and a resurgent Motorola, which has made India the hub of its high-growth markets, is considering setting up one.

"This plant will help Nokia consolidate its hold on the market," said Sara Harris, senior analyst at Strategy Analytics in London.

Sales of GSM handsets accounted for 74 per cent of total sales and CDMA phones made up the rest in 2005.

Carriers such as state-run Bharat Sanchar Nigam Ltd are furiously expanding in untapped rural areas where three quarters of the billion-plus Indians live. The networks are expected to cover all 5,200 census towns and up to half of the 600,000 villages by end of this year.

"Demand for ultra low tier phones will scale up as networks expand into semi-urban and rural locations," said Kobita Desai, principal analyst at research firm Gartner.

"However, handset vendors will need to focus on setting up robust and pervasive distribution channel networks. The role of the operator will increase in importance in the handset distribution map."