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Nokia's Big Trouble in China

10:00 AM -- Nokia Corp. (NYSE: NOK) has a lot of problems on its plate right now, but China is serving up super-sized trouble for the Finnish phone maker. (See Euronews: Nokia's Q1 Device Disaster and Nokia Loses More Than €1.57B.)

While much focus is on the U.S. in Nokia's bid for a smartphone comeback, China looks like an even greater challenge to the company's high-end device ambitions. (See Don't Count Nokia Out Just Yet, Will Nokia Have a Smartphone Resurgence? and Nokia's Nightmare Scenario .)

According to Stela Bokun, Pyramid Research senior analyst and device specialist, the main battle in China has shifted away from low-cost devices and feature phones and has moved to smartphones, and Nokia is "definitely losing ground here."

"[Pyramid] have anticipated a significant decline of Nokia in China assuming that it would take time to expand their Windows Phone-based portfolio there, but further downward adjustments might be needed," she says. "…The decline in China, due to the pressure of local players (producing Android-based smartphones), is becoming more and more worrisome."

"Furthermore, Nokia’s global position will be greatly affected by further declines in the smartphone space in China," she adds.

We've all seen Nokia's first quarter numbers by now, and they showed the dire situation in China. Here's a refresher: In Nokia's device and services unit, the biggest fall in net sales by geography came from Greater China, which was €577 million (US$758 million) -- down 70 percent from €1.9 billion ($2.5 billion) a year ago and down 43 percent from €1 billion ($1.3 billion) in the fourth quarter 2011. (See Nokia Q1 Loss Hits €1.57B.)

In terms of Nokia's device volumes in the first quarter, the biggest year-on-year decline also came from Greater China. Nokia recorded 9.2 million device units in the first quarter in Greater China, down from 23.9 million in the same period last year and down from 14.7 million in the fourth quarter of 2011.

With those painful numbers, Nokia needs to flood the Chinese market with compelling Windows Phone smartphones to stop the decline. But so far, it has launched just one -- the CDMA-based Lumia 800C for China Telecom Corp. Ltd. (NYSE: CHA), which went on sale earlier this month.

Not only does Nokia need to get more smartphones into the Chinese market -- and soon -- but those devices also have to be inexpensive enough to compete with low-cost Android-based phones. (See OS Watch: Nokia Lowering Prices on Smartphones.)

And that's a big challenge indeed.

— Michelle Donegan, European Editor, Light Reading Mobile

Michelle Donegan 12/5/2012 | 5:35:32 PM
re: Nokia's Big Trouble in China

China isn't the only place where Nokia has troubles, obviously, but I was struck by the dramatic drop in China. It's difficult to see how Nokia will recover.


Its Lumia push in China isn't off to a stellar start, really. China Telecom is the smallest of the three mobile operators in the country with 132 million subscribers (of which 41 million are 3G customers) as of February 2012.


 

Michelle Donegan 12/5/2012 | 5:35:30 PM
re: Nokia's Big Trouble in China

I think there are also a lot of small, local players in China, and India too, that are taking share from Nokia now, along with Huawei, ZTE, Samsung and HTC.  And I think cost is a big factor for these companies to succeed against a market giant like Nokia.

sarahthomas1011 12/5/2012 | 5:35:30 PM
re: Nokia's Big Trouble in China

Seems like Nokia's biggest competition there is Huawei and ZTE. What are they doing better than Nokia? Volumes? Variety? Or it is really the Android focus that's so much better than WP7 now?

SpeedingBullet 12/5/2012 | 5:35:27 PM
re: Nokia's Big Trouble in China

WP7 is probably a big part of it, that's a colossal bad move on their part. Nobody wants WP7 phones, and theres' virtually no developer support for them. They should have embraced Android or waited for WP8.

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