Summary of Key Points
After more than 40 years in the Chinese market, Finnish telecommunications giant Nokia is significantly scaling back its operations there. It plans to close most of its offices and factories and lay off employees in phases, ultimately possibly retaining only a after-sales service team, which amounts to a gradual withdrawal from the Chinese market. This decision is driven by a continuous decline in its business performance (surpassed by local companies like Huawei), a shift in its global strategy towards AI and cloud services, and Nokia's own misjudgment of the market environment. It is worth noting that this departure could impact its development of next-generation communication technologies (such as 6G), as China boasts the world's largest 5G network and application data, which are crucial for Nokia's collaboration with NVIDIA on AI-powered communication technology.
Nokia's Specific Withdrawal Measures: From Layoffs to Factory Closures, a Nearly Complete Retreat
Nokia's withdrawal is no small matter; it is a comprehensive exit:
- Layoffs and Facility Closures: The R&D center in Hangzhou (with approximately 1,600 employees) has been confirmed to be closed, followed by phased layoffs of staff in the mobile networks and infrastructure divisions, with most of the layoffs expected to be completed by the end of the year. Offices and factories in multiple cities will also be shut down gradually.
- Employee Reduction: Nokia had 13,700 employees in its Greater China region in 2020; by the end of 2025, this number is expected to drop to around 7,200. Laying off employees will entitle them to compensation equivalent to "N+3" months' salary (where N represents the number of years of service; for example, five years of service would result in eight months' salary).
- Only After-Sales Services Remaining: In the future, only a small number of employees may remain in China to handle equipment repairs, which means Nokia is essentially giving up its core business and retaining only the most basic services.
- High Reorganization Costs: Nokia has increased its reorganization expenses for 2026 from 250 million euros to 800 million euros, with 350 million euros specifically allocated for streamlining operations in China—in other words, spending money to withdraw.
Why the Former "King of Mobile Phones" Can't Sustain Its Success?
Nokia once had a brilliant presence in China, but its fortunes have declined over time:
- Glory Days: It entered the Chinese market in 1985 and participated in the construction of China's communication networks. Its mobile phone business was once the most popular brand in the country (with classics like the "Nokia 1110"). In 2010, its revenue in China reached 7.62 billion euros (about 59.8 billion RMB), making it Nokia's largest single market globally.
- Turning Point: In 2014, Nokia sold its mobile phone business to Microsoft, leaving it with only its telecommunications network equipment as a lifeline. However, local companies like Huawei and ZTE emerged, offering better technology, lower prices, and superior services, capturing a large share of the market.
- Continuous Business Decline: Revenue in China decreased from nearly 2.2 billion euros in 2018 to just 913 million euros by 2025, representing a drop from 7.9% to 4.6% of Nokia's total revenue—China has become increasingly unimportant to its business.
- Global Strategy Shift: Nokia now focuses on AI and cloud services and wants to cut off its unprofitable telecommunications equipment business to concentrate resources on these new areas.
Does Nokia Have a Valid Reason for Its Withdrawal? The Chinese Market Is Actually Very Open
Nokia's CEO has complained that "China doesn't allow us to enter the market," but this is not the case:
- The Chinese Market Is Not Closed: Last month, both Nokia and Ericsson (another foreign company) made it into the top five for 5G equipment procurement by China Mobile, indicating that Chinese operators are still willing to buy equipment from foreign companies.
- Experts Expose the Truth: Industry expert Xiang Ligang points out that Chinese operators prefer more competition to drive down prices and improve services. However, Western companies now lack the technology and price advantages compared to Chinese firms. Additionally, Western political pressure on Chinese companies like Huawei has damaged their market reputation, leading to a decline in Nokia's share.
- Nokia's Excuse: Nokia blames China for requiring the use of domestically produced equipment, but the truth is that its products are not competitive enough—if they were better and cheaper, why wouldn't customers choose them?
The Consequences of Leaving China: Losing Out on Next-Generation Communication Technologies
Nokia's departure from China could be particularly detrimental to its future technological development:
- China's Superior 5G Infrastructure: With 4.83 million 5G base stations and the largest 5G network in the world, along with a wide range of practical applications (such as industrial internet and smart transportation), China provides essential data for training AI-powered communication technologies.
- Nokia's AI Technology Depends on Chinese Data: Nokia's collaboration with NVIDIA on "AI-RAN" (artificial intelligence-enhanced wireless networks) requires extensive 5G data for effective development. Without access to this data in China, Nokia will fall behind in its technology.
- Losing Out in 6G Competition: The core framework for 6G is expected to be finalized by the end of 2028. By then, Nokia will have almost no operations in China and lack the necessary data to compete effectively with companies that have access to this market, putting it at a disadvantage in the development of next-generation communication technologies.
Conclusion
Nokia's withdrawal from China is a result of market competition and part of its global strategic adjustment. However, its attempts to blame external factors are unfounded; the Chinese market has always been open. More importantly, this departure may leave Nokia behind in the race for next-generation communication technologies. Without access to China's 5G data, Nokia will lack the necessary resources to develop leading-edge solutions. Nokia's retreat is a reflection of past failures and could also lead to future regrets.