Mobile phone powerhouse Nokia will manufacture one in five of its handsets in China this year, making the mainland not only the company's fastest-growing market but one of its fastest-growing production bases as well. David Hartley, vice-president for business development in China, said Nokia's mainland operation had seen rapid growth since the first small factory opened near Beijing in 1995. 'Our exports grew by 50 per cent last year. A significant and growing portion of our global production now comes from China. It is our intention, as the global market continues to expand, to continue to increase our production in China as well,' he said. Mr Hartley would not say how many handsets were made in China but research group Gartner Dataquest said the company had a global market share of 35 per cent in the first quarter, which would amount to annual production of between 140 million and 147 million handsets, based on sales projections. That would put potential production in China at close to 29 million handsets this year. About 60 per cent of the units are exported, primarily to Europe and Asia. Two of Nokia's 10 handset plants are in China; one in Beijing and another in Dongguan. The Beijing plant, the larger of the two, is one of the largest exporters in the Beijing area. According to Nokia, the plant shipped US$1.2 billion worth of handsets and base stations last year, accounting for one-quarter of the export total from all companies located in Beijing. When the Dongguan plant is added in, Nokia exported US$2.1 billion in products from China last year. The most common advantage cited by companies manufacturing in the mainland is the relatively low cost of skilled labour. But Mr Hartley said this was not a significant issue for Nokia. 'The [labour cost] in a mobile phone is actually a very small percentage in terms of overall cost. Most of it goes to the components and the design and manufacture of the chip. We get a small cost advantage but not a huge advantage being in China,' he said. Mr Hartley said greater benefits had been gained by building new plants on the mainland with efficient designs. The Beijing plant, which opened last year, is collocated in an industrial park with operations from 15 supporting companies that make all the phone components from batteries to bodies. The aim is to have a zero-inventory production line where orders can be placed in the morning and shipped in the afternoon. The downside of locating in China is that Nokia, like the other big handset makers that manufacture handsets in the mainland, has to deal with a degree of bias against mainland products. Consumers in Europe and North America often associate products made in China with inferior quality, particularly with electronic goods. Nokia maintained that their handsets were of the same quality regardless of where they were manufactured but company officials were coy when asked whether consumers had a preference for where their handsets were manufactured. 'We don't say made in Finland or made in China. We say made by Nokia,' said Bill Shen, business development manager at the Beijing handset plant. Mr Hartley was quick to defend the handsets produced in China, saying internal studies showed the quality was as good as or better than from plants in Europe. 'The manufacturing methods are exactly the same, so the quality of what we produce in China is exactly the same as in our German factories or our Finnish factories. In fact, if you ask me for my personal opinion, the quality of our workers here in China is better,' he said. Last week, Nokia forecast a sales growth of 10 per cent in the second half of this year. The company expects the global handset market to grow to between 400 million and 420 million units this year.
