The Finnish wireless company also plans to lay off about 800 full-time employees at two Texas production plants over the next five months.
Nokia's move follows manufacturing alterations made by rival cellular phone makers over the past year. Last month, Swedish wireless company Ericsson, the world's No. 3 mobile phone maker, announced plans to exit the handset manufacturing business as it reduced revenue and profit forecasts for the year. Instead, Ericsson will out source its phone production to Flextronics International.
David Chamberlain, a senior wireless industry analyst at market research company Probe Research, said that geography could have a strong place in Nokia's finances.
"The biggest area of growth is in the lower-end handsets. Typically, it's the (production of) lower-end phones that get(s) pushed offshore," Chamberlain said. "A lot of the time the components are made in Asia. So the closer you can have the manufacturing and assembly, the lower your expenses will be."
Although it has shown strong growth in recent years, the mobile phone market is beginning to slow. A saturated market means fewer first-time buyers, leaving manufacturers to rely on replacement purchases from more savvy repeat customers.
In addition, a low-price trend, high research and development costs, component parts shortages, and an expensive U.S. labor force have contributed to the cell phone market's recent profit struggles, analysts say.
In December, No. 2 cellular phone maker Motorola reduced its 2001 financial projections. A year ago, Qualcomm sold its handset manufacturing business to Kyocera after the company determined it was too small to compete in the cutthroat market.
The changes announced Friday will affect Nokia's manufacturing in the Americas. Over the past year, the company has increased its production for the region at facilities in Mexico, Korea and Brazil.
Nokia will continue to manufacture phones at its Ft. Worth, Texas, factory, but will predominately turn the facility's focus toward engineering support and fulfillment for the U.S. market. Nokia also will consolidate its Texas operations into one plant.