Handset blues

(Telephony) Siemens, which became the number two mobile phone manufacturer in Europe behind Nokia when Ericsson began outsourcing the production of its handsets, today said it slashed 2000 workers at three of its German production sites.

The company, which recently announced that it would place an increased focus on the United States market, looks to be shedding its manufacturing responsibilities—as Ericsson and Motorola have done—in order to focus on more profitable parts of the business.

“They are moving their production to contract manufacturers…this is very common because companies need a low cost of manufacturing,” said Andy Fuertes, senior analyst with Allied Business Intelligence. “I don’t think Siemens’ decision is a result of weakness.”

Although Siemens decided to adjust its manufacturing capacity, it does not mean the company is disinterested in increasing its market share, Fuertes added.

In fact, Siemens’ Information and Communication unit outlined during CTIA Wireless 2001 a strategy for its U.S. mobile business that calls for the company to eventually become one of the top-three handset providers worldwide. The company expects to bring its first phones to the U.S. market later this year.

In other handset-related news, Ericsson plans to withdraw its first shipment of GPRS mobile phones from the market due to a flawed factory installation. The R520 models were sent to Sweden and possibly two other European countries. An error in the phone’s set-up causing a shorter standby time was identified as the reason for the recall.