Will Salcomp buy of Nokia unit be a lifeline for telecom SEZ?

Salcomp’s acquisition of the defunct Nokia’s plant at Sriperumbudur, near Chennai, is good news, but it is more like a consolation prize for Tamil Nadu, which once prided itself as the country’s largest mobile manufacturer when Nokia was the largest producer of mobile phones from 2006 to 2013.

Job opportunities

The State government feels that Salcomp’s purchase of the Nokia plant will give a new lease of life to the telecom SEZ, which was once the jewel of the State. In the next five years, Salcomp is likely to invest nearly ₹1,300 crore in the complex and provide employment opportunities for nearly 10,000 people, said a State government press release.

For Salcomp, it is a major challenge to emulate Nokia’s success in the SEZ complex. During the thick of action in 2010, nearly 50,000 employees were working round-the-clock at the Nokia SEZ at Sriperumbudur, producing Made-in-India Nokia mobile phones that were used globally.

But things began to decline when Android phones stormed the market and grabbed Nokia’s market share. When Microsoft Corporation bought Nokia’s handset division from Finnish major Nokia Corporation in September 2013, the production unit near Chennai was left out of the devices & services deal which Microsoft signed in 2014, because the unit was embroiled in tax disputes with the State and Central governments. The factory stopped production from November 1,2014, destroying the dreams of over 50,000 workers from nearby villages. Today, the complex wears a deserted look.

Both the Centre and State governments, in the last six years, have tried to sell the empty land and eventually succeeded in pursuing Salcomp to produce components (mostly chargers) for Apple in India. “This is a big let down as the plant was manufacturing phones, and will now be producing components,” said a source associated with the phone industry.

Nokia’s is a fairy -tale story that lasted just seven years. On January 2, 2006, the Finnish telecom major commenced commercial production of mobile handsets at Sriperumbudur. Within two months, the plant was manufacturing over one million handsets. A telecom cluster was created with vendors like Jabil and Flextronics setting up their units inside the campus to support Nokia. Thousands of employees, mostly recruited from nearby villages were proud to be Nokiaites with the comfort of working in an air-conditioned building and getting good food and clothing.

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

Tax crackdown

However, the downfall started on on January 8, 2013 when income-tax officials raided Nokia premises on suspicion of tax evasion. Later, the Tamil Nadu government asked Nokia to pay ₹2,400 crore as value-added tax, stating that handsets made at its Sriperumbudur plant were also sold in India.

As the tax issue was going on, Microsoft bought Nokia’s handset division, but left out the Sriperumbudur plant in the deal. State government officials are now hoping that Salcomp would be the next Nokia at Sriperumbdur with Apple trying to divert its production from China to India in a large way. “We hope Salcomp replicates the success of Nokia at the complex,” said an official.