Nokia to Shut Down Indian Handset Factory Amid Tax Woes

Nokia has decided to shut down one of its largest handsets-manufacturing facilities, located outside southern India's Chennai city, as a Microsoft decision to terminate a mobile purchase agreement has left the factory with no business.

Nokia on 7 October said that it will inform all stakeholders including the Labour Commissioner of the suspension.

The move could impact some 1,500 jobs.

Nokia, which sold its mobile phone business to Microsoft in April, was compelled to leave the Indian factory out of the deal owing to a tax dispute with the Indian government. It has operated the factory as a contract manufacturing unit for Microsoft.

Nokia said in a statement: "Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from 1 November. In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility from 1 November.

"Unfortunately, the continuing asset freeze imposed by [India's] tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor to support the long-term viability of the established, fully functional electronics manufacturing ecosystem."

"As a responsible employer, Nokia is currently evaluating options to minimize the impact on existing employees at the manufacturing facility. It will share further information once details have been finalized," the statement added.

In April, Nokia introduced a voluntary retirement scheme at the factory and some 5,000 of the 6,600 permanent employees opted for the scheme, the Press Trust of India reported.

Nokia began manufacturing outside Chennai in January 2006.