Nokia announced that it will no longer use its Chennai manufacturing plant in India from Nov. 1 as Microsoft has terminated its mobile purchase agreement with the factory.
Nokia, the mobile phone making company, announced Tuesday that it will be suspending all operations, including the manufacturing of mobile handsets at the Chennai plant in India from November 1, 2014. The move follows Microsoft's termination of mobile purchase agreement from the foreign manufacturing plant, which was not included in the $7.2 billion worth Nokia acquisition in April. The company issued a statement confirming the change due to lack of business from its parent company.
Nokia's manufacturing facility is located in Sriperumbudur, about 25 miles southwest of Chennai. It is also one of Nokia's largest manufacturing and assembly facilities, which once had about 8,000 employers. But the number significantly dropped to a little over 800 workers following a major tax dispute with the income tax departments, Business Standard reports.
"Unfortunately, the continuing asset freeze imposed by the tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor to support the long term viability of the established, fully functional electronics manufacturing ecosystem," Nokia said in a statement, India's national newspaper The Times Of India reported on Tuesday.
When Microsoft completed the acquisition of Nokia's Devices and Services business in April for a whopping sum of $7.2 billion, the Redmond based software giant excluded the Indian manufacturing plant due to tax related disputes with the Indian government. Nokia's Chennai plant is the only manufacturing facility in India, which was set up in January 2006 to export devices to different markets including Middle East, Africa, Asia, Australia and New Zealand.
But the tax disputes started when the state government found the company selling products in the domestic market without paying taxes. The state issued a massive penalty for three financial years from FY2010 to FY2012. Nokia is still pursuing the case in the Supreme Court.
In a separate report, Taiwanese smartphone maker HTC showed interest in taking over the Chennai plant in order to tap into the developing market. But there has been no development in the report so far.
