Nokia Corp. announced it will expand its research and development efforts in China, a move that comes amid doubts about Nokia’s ability to maintain its grip on the market as well as moves by the company’s rivals to capture Nokia’s dwindling share.
“China is definitely a strategic part of Nokia’s global R&D network,” said Jorma Ollila, Nokia’s chairman and chief executive officer. “We are pleased to be broadening our R&D activities in China, and these steps further strengthen our long-term commitment to the country. With increasing depth in China’s talent base and an improving regulatory environment for R&D, we see excellent opportunities to expand our collaboration with leading domestic institutions. This cooperation will boost technology innovation and localization, enabling us to strengthen our R&D in key areas and respond to Chinese customer needs.”
Nokia said it will establish five new R&D units in China employing more than 600 people, including a CDMA R&D facility in Beijing. The company said it expects that 40 percent of its mobile phones will be designed and developed in the new Beijing Product Creation Center.
Nokia is China’s No. 1 mobile-phone maker with 15.6 percent of the market, according to Credit Suisse First Boston. However, the company faces massive competition from No. 2 Chinese player Motorola Inc., which sits just behind the company with a 15.4-percent market share, as well as from a range of local Chinese handset players. Indeed, Siemens AG recently announced it will pour $1.2 billion into the Chinese market during the next few years in a bid to improve its No. 15 ranking in the market.
“Nokia’s market share, although the largest … has only really stabilized, rather than increased, despite the considerable investment the company made in 2003 to revamp distribution,” wrote CSFB in a May 10 research note. “We also note that the Chinese market is becoming increasingly penetrated by product areas in which we believe Nokia is poorly positioned.”
The firm said Nokia is behind in high-resolution color-screen phones, CDMA phones and clamshell-style devices.
Further, Nokia has watched its worldwide market share slide due to gaps in its mid-range handset line-up, a situation that has forced the company to lower its handset selling prices, according to reports. Wall Street remains unimpressed as Nokia recently suffered several stock downgrades from the likes of Morgan Stanley and others.
