Nokia, the world leader in mobile phones, on Wednesday announced that it would set up a mobile phone manufacturing plant in Chennai at a cost of $150 million (Rs 650 crore).
Interestingly, the company was in talks with other state governments to house the manufacturing unit and the Maharashtra government had stuck its neck out when the state Chief Minister Vilasrao Deshmukh said that Nokia would invest in the state.
The Maharashtra government was earlier in talks with Nokia to set up a manufacturing unit on a 150-acre plot of land at Airoli in New Mumbai. Deshmukh, who had met a Nokia team, had assured that Maharashtra would match, if not better, offers made by any other states, like Tamil Nadu, Karnataka and West Bengal.
But finally it was Tamil Nadu that came out trumps. Nokia India Managing Director, Sanjeev Sharma, in a telephonic chat with rediff.com said that the decision to set the $150 million manufacturing facility on a 210-acre site in Sriperumbudur, 40 km from Chennai, was taken because of qualitative factors and not just on quantitative factors of cost.
"I think one of the reasons why we set up our plant in Chennai was the excellent support and facilitation from the state government. The terms of our MoU (memorandum of understanding) with the state government are confidential and hence we cannot divulge it but the cooperation we received from them was excellent," Sharma told rediff.com.
"The overall freight cost, the land cost, the distance from the airport, skilled labour in terms of ITI-trained technical graduates, logistics connectivity in terms of sea, land and airport were all factors that helped us decide," Sharma said.
"It did help our comfort level that other large multinationals like car major Ford and glass giant St Gobain had also invested in the same state," he said.
The company's plan to invest in India comes at a time when the mobile phones market in the country has literally shot through the roof. India generates a demand of 23-25 million handsets a year and Nokia has a market share of over 50 per cent.
Sharma said that the mobile phone subscriber base in India was growing at around 1.8 million a month. He said that new subscribers along with replacements would account for about 25 million handsets a year.
The construction work at the site of Nokia's new manufacturing unit will start in later this month and production is expected to begin in the first half of 2006. Nokia foresees ramping up the factory gradually and the work force reaching approximately 2,000 employees when production is full scale.
Mobile penetration in the Asia-Pacific region is expected to be a major contributor to the global mobile subscriber base surpassing the 2 billion mark by the end of 2005. Therefore, India which is set at the heart of the region where mobile communications is growing rapidly was a natural choice for the location of the new production facility.
In India, Nokia is the market leader in mobile devices. It maintains sales, marketing, customer care, and research and development sites in the country. The mobile phones giant was also recently recognized as the Brand of the Year by the Confederation of Indian Industry.
It also bagged the most respected consumer durables company award instituted by the Businessworld magazine.
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