Ericsson, the world’s third-biggest supplier of mobile phones, has announced it will pull out of the handset market due to dramatic losses incurred in its consumer division.
Ericsson has outsourced the production of all its handsets to Taiwan’s Arima and GVC Corporations. Such restructuring means that about 1,000 people worldwide will face redundancy.
In a deal effective from 1 April, Singapore-based Flextronics will take over Ericsson facilities in the UK, Brazil, Sweden, Malaysia and some parts of the US. New contracts will be offered to 4,200 Ericsson staff by Flextronics.
In the company’s end-of-year financial statement, released today, shares showed a drop of 13 percent after its sales growth failed to match forecasts. It had been predicted that sales would increase by over 20 percent, but the financial statement showed a growth of only 15 percent.
Ericsson is the first leading mobile phone company to abandon the production of handsets amidst the dramatically slowing tide of handset sales.
Ericsson assured shareholders the shakeup in handset production would lead to major cost saving, allowing the company to concentrate instead on increasing 3G (third-generation) investments.