The rise and demise of Nokia From the cradle to the grave and beyond

Nokia was “making in India”, prior to the time when it became the magic phrase to curry favour with the ruling dispensation by bypassing the red tape that has tripped many a multinational while navigating through the booby-trapped alleyways of power in New Delhi. So what went wrong?

Röhan Abraham

It was the onset of winter in 2013, when as the trees shed their leaves to herald the inevitability of the dying year, Nokia’s plant which had encompassed the populace of Sriperumbudur in its benevolent umbrage for the better part of a decade shut shop, felled by the axe of global capital, and aided by the tailwind of hawkish Indian tax authorities.

Nokia laid down roots in the town of Sriperumbudur in Tamil Nadu on January 2, 2006 when it commenced manufacturing mobile handsets, which was then considered to be a novelty. The plant rolled out the earliest generation of feature phones that mesmerized a generation of consumers that were just coming to terms with the wonder that was mobile telephony.

Within two months, the plant was manufacturing over a million handsets for both Indian and overseas markets. A telecom cluster was created with ancillary vendors tapping into the demand for hardware components. Jabil and Flextronics set up their units inside the Nokia facility.

Nearly 1,100 employees were recruited to take up posts on the assembly line, the majority of them being unskilled workers who were given operational training requisite to their role in the manufacturing cycle. Most of the recruits were from nearby villages, and were proud of their good fortune in being associated with the global technology giant.

During the heydays of its stint in 2010, Nokia had 50,000 people on its roster, working in round-the-clock shifts. The government of Tamil Nadu had granted the manufacturing corridor at Sriperumbudur SEZ status, with many industry-watchers even likening it to the industrial hub of Shenzhen, in China.

Other multinationals weren’t too far behind in the queue in jumping on to the bandwagon. Daimler Benz, and Hyundai, among others actively sought, and were granted sops from the administration in setting up plants in the vicinity of the corridor.

However, the fairytale, which started with the advent of Nokia ended abruptly and left many workers who had turned their lives around for the better, left to scramble for newer pastures, after the takeover by Microsoft left the Finnish company in disarray.

“Many of us who had taken loans were left helpless since Nokia announced its decision towards closure of the plant with only a couple of months’ notice. I was an engineer at Nokia, and was drawing a salary of Rs. 28,000. I had taken a home loan, and was reliant on my salary to repay the loan, let alone make ends meet. However, since I got another job at SICGIL, which paid me Rs.32,000, I managed to avoid defaulting on my loan,” said Hemant Kanithi, an aggrieved employee.

Hemant ranks among the more fortunate. Assembly-line workers who were paid Rs.6000-8000 in the day have been left in the lurch, with many yet to find new jobs. For the nouveau middle class in the town that had slowly, but steadily climbed the ladder of progress, the move to scrap operations came as a jolt from the blue. Adam Smith’s ‘invisible hand’ had snatched the ladder from below their feet.

Since manufacturing is a specialized activity, experience counts for little outside one’s domain, and moreover, feature phones have now become defunct in the wake of technological advancement, which in turn has propelled the a takeover of the market by smart phones which come with an array of features along with not-so-hefty price tags.

Nokia had by then, run afoul of the tax authorities, and Microsoft had newly acquired the Finnish firm for a cut-price bid of $ 7.2 billion. However, due to the legal quagmire that Nokia had found itself entangled in, the factory at Sriperumbudur was not a part of the deal on account of the impediment that it posed.

Moreover, since Nokia was contractually bound to produce devices which ran on the Windows Phone operating system, laying off employees the who produced its staple, albeit iconic phones was a decision the management had to take. For the workers, it was a bitter pill to swallow. After the auctioneer’s hammer fell, the trance was broken. The fairytale was over.

What happened in the aftermath of the shutdown remains hazy. From the outside, the edifice of the factory retains an air of efficacy, with shellacked walls gleaming in the afternoon sun. But beyond the perimeter walls which are fortified by concertina wire, there is an eerie silence that seems surreal to the casual onlooker.

“They are yet to pay our provident fund and other benefits. It has been well over a year, and we could have earned interest on that amount,” bemoaned Hemant. He further added that they were paid for only two months in 2013, and the rest of the year’s wages are yet to be disbursed.

For Senthil Kumar, who used to work on the assembly line at the Nokia facility, the burden of indebtedness had encroached upon his meager savings, nibbling away at whatever little he had amassed through years of toil, till he was forced to default on an earlier loan.

He worked on a temporary basis at the Apollo Tyres factory in the SIPCOT Industrial Estate, which falls inside the government decreed SEZ. However, after that opportunity also fell by the wayside, he has been moonlighting as security guard by night, to keep his biological clock ticking, since years of working after the curtain of darkness had fallen had attuned his body to the nocturnal.

He still reports for night duty, but not the 7pm-11am shift that he used to put in at Nokia.

“It used to be pretty easy initially since the agency I had signed up with had allotted me to a personal residence, but of late, things have been quite eventful, especially since the sarkar decided to beggar the public by making them run from pillar to post in search of cash. Still, I miss the old days when you could be proud even after a long day’s night since you were part of a collective effort that contributed to the bigger picture. Every phone that left the factory would fill its user with news of joy or despair, and partaking of their emotions in an indirect way is truly humbling,” he said, in a flash of reminiscence.

Kumar is today, a security guard at a branch of the State Bank of Mysore, situated at Ramanujar Nagar in Sriperumbudur. Although, he and Hemant still stay in touch well after they were banished from the town’s first major factory, a Garden of Eden in what was then a forgotten point on the map which sat on the outskirts of Chennai, there is an air of latent tension between the two former comrades.

The forbidden fruit had endowed them with the knowledge of status, an evil that led to a realization of the distance that separated their respective stations in life.

“You have it easy with a new job that pays better,” lamented Kumar, since in the old days, work culture at Nokia was such that there never was a dichotomy between employees based on their rank or seniority. They were all cogs in the wheel that revolved around the clock to churn out flint edged phones that were known for their sturdy build and immunity towards physical damage.

Hemant, who we had managed to track down, had invited his former colleague over at our request, but after the initial exchange of pleasantries, the two men ran out of words and sat slouched over a narrow bench in silence, inhaling the rancid smell of beer that pervaded the air, which was aglow with the nebulous patterns weaved by dissolving plumes of cigarette smoke. Both are daytime drinkers. Old habits die hard.

Hemant was quick to remonstrate that his present status as a salaried man was not to be taken at face value, and was in fact a step down from the days of yore at the old plant. “The job at SICGIL is pretty stressful. Not many people outside of town have heard of the company but everything right from ice-creams; to soft drinks or the bottle of beer in front of you contains carbon dioxide manufactured at the SICGIL factory. We are a feeder industry and the pressure to adhere to stringent quality checks takes a toll on the employees,” he quipped, as if by way of explanation.

However, the two speak in one voice when asked about the wages and benefits which have been a long time coming. There have been reports that the pending payoffs would happen come January of next year, with rumours also doing the rounds that laid off employees who were still seeking opportunities would be reinstated once the factory restarts operations under the aegis of Taiwan’s Foxconn Industries with who the Finnish handset manufacturer had tied up after its premature divorce with Microsoft.

Nokia was “making in India”, prior to the time when it became the magic phrase to curry favour with the ruling dispensation by bypassing the red tape that has tripped many a multinational while navigating through the booby-trapped alleyways of power in New Delhi. The autopsy of the company’s Indian operations reveals that the mortality of industries in the country goes beyond the vital signs of profitability and brand value.

Nokia’s foray into the India market was initially through the CKD (Completely Knocked Down) route where the components were manufactured abroad and assembled within the country. But these phones were expensive owing to the cost of duties levied by the government on imports. Realizing the scope for expansion in a market with great untapped potential, the Finnish tech major decided to set up shop in India, and zeroed in on Sriperumbudur as being fertile ground for its first venture in the subcontinent.

Nokia invested over $300 million at the 210-acre plant located on Chennai-Bengaluru National Highway. Over six years, it produced over 500 million units of over 20 different models, including the Asha range of devices. It was the largest Nokia production facility worldwide, which eventually employed 9,000 people, 70 per cent of whom were women.

But Nokia’s fairy-tale story did not last long. On January 8, 2013, Income Tax (IT) officials raided Nokia’s premises at Sriperumbudur on suspicion of tax default to the tune of Rs.2500-3000 crore. The company’s handsets then, used to run on its in-house Java based operating system, Symbian which was developed at its Research and Development (R&D) centre back at its headquarters in Helsinki.

The bone of contention between manufacturer and taxmen was that any royalty payment made against the supply of software by the parent company attracted a 10 per cent tax. According to the IT Department, Nokia India hadn’t paid the levy since 2006.

The problem snowballed into a Rs.21000-crore tax case with the IT department alleging that Nokia withheld tax norms since 2006, while making royalty payments to its parent company in Finland.

It was not the end of the company’s litany of woes. Next was a salvo from the Tamil Nadu Government asking Nokia to cough up Rs.2,400 crore as value-added tax, stating that handsets made at its Sriperumbudur plant were also sold in India, and thereby liable to be taxed separately by the state government. The company filed a writ petition in the Madras High Court against the claim. Nokia India was subsequently forced to reduce its manpower due to the uncertainty over the tax dispute.

Meanwhile, Microsoft had bought Nokia’s handset business in September 2013 with the rider that the latter would clean up its books before the date of takeover. Nokia now needed to resolve all outstanding law suits arising out of tax disputes with the Indian government before March 31, 2014, to enable the transfer of assets to Microsoft.

It was not to be. Nokia suspended handset production at the Sriperumbudur facility from November 1, 2014. Many of the employees left the company before the closure while the remaining opted for voluntary retirement. Today, many of them are at Sri City, the upcoming hub about an hour’s drive from Chennai. Others who had the requisite experience managed to get jobs in allied industries.

Mohammad Ismail

Mohammad Ismail commutes from one end of the city to another to get to his workplace at the Hinduja Foundries factory in Ennore. The foundry is a subsidiary of Ashok Leyland, the market leader in the commercial vehicles segment in the country.

“The difference between the two companies is evident. We didn’t have an employees’ union at Nokia but there was an informal grouping among the workers who dealt with the company regarding our problems. They had sent a representation to the management regarding the non-payment of dues. That was the last we heard of it. Company officials claim to have cleared the dues vis a vis the provident fund for the entirety of the 12 months while we have received only 2 months’ dues. The ‘union’ members were also quite dodgy, and gave only sketchy details of the meeting,” said Ismail, who is suspicious of backhanded overtures to settle the matter.

However, the Centre of Indian Trade Unions (CITU), the CPI (M) affiliated labour collective to which most of the unofficial union members swear allegiance to, refutes all claims of impropriety. N. Prabhu, a senior CITU leader from Kancheepuram district rubbished the allegation, saying that they were a body meant to fight solely for the rights of workers and that all accusations of acting contrary to their purported aims were baseless. Officials at the Nokia facility in Sriperumbudur were unavailable for comment.

Things have taken a turn for the better after Microsoft’s unceremonious exit from its ambitious gamble on Nokia. Taiwanese hardware manufacturer Foxconn has joined hands with Nokia to roll out smart phones that run on Google’s open-source Android platform. A roadmap to revive the plant at Sriperumbudur is rumoured to be on the cards, and those who had been summarily dismissed in the past, remain cautiously optimistic that they will be paid their dues, and reinstated if and when the plant resumes operations.

But for now, the blue billboard which stands at the entrance to the deserted factory sticks out like a tombstone, serving as a stark reminder to foreign capital of the sudden death that follows after stepping on the minefield-ridden road to gleaning profits from investing in India. For the workers, wounded pride was overridden by the loss of livelihood.

Slowdown in the Chinese economy has opened up avenues for other developing countries, with multinational corporations looking elsewhere to find cheap labour to drive the engine of global growth. However, it remains to be seen whether Foxconn will be able to resurrect Nokia’s facility at Sriperumbudur from the dead, and restore it to the halcyon days of yesteryear. The winter of discontent invariably precedes a spring of revival.

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Röhan Abraham
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