Chinese Low Cost Labor Massacres Western Telecom Jobs (Nokia, Alcatel, Motorola)

The relentless rise of Chinese telecom equipment and OEM companies has massacred telecom jobs in the West with major companies like Nokia, Alcatel and others firing in the thousands. Note Huawei and ZTE have become the nemesis of the telecom equipment makers which are showing losses in the last few years. These companies are not managing to compete with the low cost engineer advantage of the Chinese firms . Nokia is also firing thousands in its western factories in Poland and other places as it moves production to Asian factories. Note while Nokia has become unprofitable to other causes like Apple and Android, low cost phones from Asia is the biggest factor in its demise as well.

Note ZTE and Huawei have won large orders as they sell equipment in the biggest markets such as India with prices which are 20-30% lower than that of the western companies such as Motorola (bankrupt and solar), Nokia – Siemens and Alcatel Lucent. These western companies had earlier merged to survive but they are still making billion dollar losses. The massive advantage of the Asian companies is due to their technically advanced cheap labor force where the cost of an engineer is 1/10th of the western companies.

Global Arbitrage of Labor has cost massive disruptions to the Western Labor Force

One of my pet theories is that they we see a lot of distortions and oppurtunities for arbitrage is because labor is not globalized while capital and trade are . When capital and goods/services with some restrictions can move freely around the globe , there are innumerable restrictions on movement of labor leading to outsourcing. The MNCs with sprawling global structures are able to best exploit this situation by moving most of their labor requirements to low cost locations in Asia. It is not only manufacturing and low valued added work that they are moving but their entire R&D capabilities. Applied Materials , one of the world’s largest semiconductor has moved and is in the process of moving the rest of its manufacturing and R&D capabilities to Asia. This is leading to mass layoffs in its US operations.

Finnish phone maker Nokia has announced it will be cutting down on its manufacturing operations in Hungary, Mexico and Finland in order to move device assembly work to its Asian factories instead. Nokia said the move would cause approximately 4,000 workers to be laid off.
“Shifting device assembly to Asia is targeted at improving our time to market,” said Nokia in a statement. The company added that the transition would allow Nokia to work more closely with suppliers and enable it to “introduce innovations into the market more quickly and ultimately be more competitive.”

Alcatel-Lucent to Cut Up to 1,800 Europe Jobs, Union Says

Alcatel-Lucent, France’s largest telecommunications-equipment supplier, plans to eliminate as many as 1,800 positions in Europe through firings and relocation, a top union official said.Almost 500 positions in Italy, or 20 percent of the total in the country, will probably go, Philippe Saint-Aubin, a representative of the European workers’ council for the Paris- based company, said in an interview today. Also affected will be more than 10 percent of the workforce in Belgium, and 5 percent in France, where Alcatel employs 9,000 workers, he said.Alcatel-Lucent, scheduled to report earnings tomorrow, lags behind rivals such as Nokia Siemens Networks in adjusting its workforce as phone companies withhold gear orders. Nokia Siemens Networks, the venture between Nokia Oyj and Siemens AG, said in November it will eliminate 17,000 jobs, or about 23 percent of its workforce.