Nokia pulls $5 billion of business from ODMs

El Segundo (CA) – Market research firm iSuppli reports that the downturn in the cellphone industry is severe enough to have prompted Nokia to pull its phone assembly business from contract manufacturers. That means that electronics manufacturing service (EMS) providers and original design manufacturers (ODMs) will lose more than $5 billion in business from Nokia alone.

The world’s largest cellphone maker said it has stopped using contract manufacturers for the assembly of its phones, resulting in a substantial impact of the entire EMS and ODM industry. Nokia most recently outsourced about 17% of the manufacturing of its phone to companies such as Foxconn, BYD, Elcoteq and Jabil Circuit. Now it seems that Nokia will manufacture all of its phones in-house.

Adam Pick, principal analyst for EMS/ODM at iSuppli said that “Nokia’s pull-back will shed more than $5 billion in revenue from electronics contract manufacturers. That most means more overcapacity, more headcount reductions and, obviously, more problems.”

Overall, iSuppli believes that the EMS/ODM market will decline by about 9.9% to $270.8 billion in 2009, down from $300.7 billion in 2008. Nokia’s announcement prompted the firm to further reduce its forecast for 2009 and the following years.

The 2009 forecast is just above the 2006 number of $264.0 billion. iSuppli believes that the ODM industry will suffer for many years and not return to the 2007 level of $308.1 billion and 2008 volume in the near future. By 2012, the industry is expected to have grown to $286.0 billion, the firm said.