‘Make In India’?

The NOKIA Story


The manufacturing unit  of Nokia located at Sriperumbudur near Chennai finally closed down its operations with effect from 1st November 2014 leaving over 33,000 workers jobless—8,000 direct and 25,000 indirect. It had been set up just 8 years ago on a massive 210 acre site following persistent wooing by the central and state governments.

Nokia got a vast array of benefits ranging from cheap land to waivers of stamp duty, VAT, CST, customs duty and other taxes. These benefits, amounting to over Rs 45,000 crore, have been given from public funds, in other words, monies which rightfully belong to the Indian people. The plant was declared to be a "public utility" to prevent industrial action. The management was allowed to employ an overwhelming number of contract workers at even lower wages and thus exploit workers to the bone.

In the eight years of its operations, the Sriperumbudur plant's cumulative production was 800 million handsets. It was the most productive plant for Nokia globally. It has been making phones worth about Rs 30,000 core a year. At its peak, it was the world's largest mobile phone plant, with 8,000 permanent employees working three shifts, producing more than 15 million phones a month. It was exporting phones worth more than US$ 2 billion a year. Nokia India's overall turnover totalled Rs 151,000 crore between 2005-06 and 2011-12. It transferred Rs 25,000 crore to the parent company as payment for software. In 2011-12 alone, it paid a dividend of Rs 3,500 crore to Nokia, Finland. Profits generated here were particularly enormous due to the ruthless exploitation of the youthful work force as well as the waivers of taxes and many concessions provided to Nokia by the central and state governments.

But what did the workers of Nokia get in return? After getting employment for a few years at very low wages during which period they helped to generate the enormous profits for the owners, they have been rendered jobless. Thousands of families have been devastated.

The Nokia case shows just what aspects of "making in India" are attractive to big international monopolies.

*    Workers in Nokia received just around Rs 5,000 to Rs 8,000 as wages per month including overtime payments etc. This is far below the living wages in that region. The average wages of workers in Sriperumbudur were one-forty fifth of the wages of Nokia workers in other countries.
*   The average age of this entire work force (72% women) was just 25 years! The demography of India means that industrialists can enjoy the fruits of labour of a young and energetic work force, ready to put in several hours of overtime every day.

The Nokia plant was essentically using cheap Indian labour to assemble handsets using components mass produced in its other factories. Cell phone components—the jijits and widgets, display, process, and memory chips etc came from Shenzhen and Dongguan in China. The only components actually made in India were the outer casing and the cardboard packaging, items that constituted less than 5 percent of unit cost. Even the simplest components, the keypad and the charger, all low tech items, could not be manufactured to scale at Sriperumpudur. The Nokia management took advantage of what was most attractive to them—the policy of exploiting cheap youthful labour together with massive consessions and subsidies.

By declaring the Nokia SEZ to be a "Public Utility", the machinery of the state was used to ruthlessly suppress any resistance and united actions of the workers when the plant was running. They were ably supported by goons of the management and gangsters willingly supplied by the ruling class political parties. But their treachery was not limited to this period.

Workers of Nokia—Sriperumbudur vehemently opposed the closure move. They took up various forms of agitations—hunger strike and protest agitations. Representations to the MLA's and MP's, the Tamilnadu Chief Minister, the Union Labour and Finance ministers and the Prime Minister went unheeded. None of the arms of the Indian state—legislature, executive or judiciary—came forward to stop the closure of the Sriperumbudur plant. In other words, the closure of Nokia has the full support of the ruling elite and the Indian state.

Nokia was one of the strongest mobile handset brands just a few years ago with a massive market share worldwide. The Symbian operating system then used by Nokia [it bought the system from its erstwhile owners in 2008] had a dominating 62.5% market share in 2007—compared to its rivals Microsoft's Windows Mobile (11.9%) and RIM (Blackberry) (10.9%). However, with the launch of the iPhone 3G in 2008, Apple's market share doubled. In the last quarter of 2008, Nokia retained a 40.8% share but there was a decline of over 10% from the corresponding quarter in 2007, replaced by Apple's increasing share. Despite various efforts by the Nokia management, they could not stop Nokia's smartphone market share slide.

Samsung and Sony Ericsson, who earlier used Symbian, chose to make Android powered smartphones instead. In February 2011, Nokia unveiled a new strategic alliance with Microsoft. Despite this, Nokia's smartphone sales soon collapsed—from the beginning of 2011 until 2013, Nokia fell from number 1 to number 10 in smartphone sales.

Nokia was wooed to come and ‘Make in India’ at a time when it reigned as the market leader, but a few short years later it has come a cropper. What has happened with Nokia has happened earlier with other companies too. Transnational corporations and monopolies that dominate the market at one time get edged out by rivals and taken over.

To retain its profits, Nokia has been implementing mass layoffs and factory closures worldwide. Since 2012, some 10,000 people in various other countries have lost their jobs. The Salo factory in Finland, which was established in 1979 and produced the first-Nokia phone, is also to be closed.

The US$/Indian Rupee rate changed from about 45 in 2006, when the Sriperumbudur plant started, to about 60 in 2012. This increased the landed cost of the imported constituent of the cell phone's cost structure. The near-total reliance on imports meant that the change in exchange rate significantly reduced the benefits of cheap labour from the plant; especially because the plant was essentially an assembly operation. It cut into the profits and made "Making in India" less attractive for Nokia.

In April 2014, Nokia opened its Vietnam factory in Hanoi City. Lower labour costs, combined with the close proximity to an existing cluster, made this a valuable location for Nokia. The ramp up from 275 workers to over 10,000 took place by mid-2014.

Thus Nokia opened a plant in Vietnam at the same time that it was shutting down plants in Sriperumbudur and elsewhere. The drive for maximum profits has dictated the move from Sriperumbudur to Vietnam!

[source : Mazdoor Ekta Lehar, Organ of the Central Committee of the Communist Ghadar Party of India]

Vol. 47, No. 26, Jan 4 - 10, 2015