Nokia’s Collapse Doesn’t Deter Finns on Innovation

By webadmin on 09:19 pm Apr 22, 2012
Category Archive

Kati Pohjanpalo & Diana ben-Aaron

Finland’s close alignment with a single company has delivered wonderful highs. In 2000, Nokia was the world’s dominant mobile-phone manufacturer. As paradise ends, the consequences are harsh.

Nokia’s 95 percent share-price plunge from its 2000 peak has left thousands of engineers looking for work now that Nokia is curtailing local development and moving production to Asia.

Nokia’s share of gross domestic product probably shrank to 0.8 percent in 2011 from as high as 4 percent in 2000, according to Jyrki Ali-Yrkkoe, an economist at Helsinki-based researcher ETLA. By the end of this year, Nokia’s Finnish employment will have fallen 40 percent in six years, according to the Economy Ministry.

Nokia’s smartphone business is being eaten up by Apple’s iPhone and handsets that use Google’s Android system. Its affordable phones for emerging markets are being undercut on price by Chinese rivals. Finns have shown their faith by buying Nokia shares. Finland’s households hold about 10 percent of the stock, up from 5.4 percent two years earlier. Yet there’s a definite sense that Finland is over the worst of its Nokia shock.

“Nokia has overshadowed the other industries here for years,” said Petri Peltonen, who runs the innovation unit at the Economy Ministry. “It was sucking all the resources from the country. Now the presence is diminishing a bit.”

Finland may keep a reputation for cool stuff through mobile games. Angry Birds took iPhone users by storm, and its creator, Rovio Entertainment, could be Finland’s next big tech initial public offering, with a possible valuation of more than $1 billion. Employment at Finland’s 100 game companies will more than quadruple to 6,500 by 2020, said Sonja Kangas, head of the Finnish branch of the International Game Developer Association.

The government is trying to attract data centers to old paper mills, touting an electricity grid that suffered downtime only once in 30 years. Google was the first taker, and International Business Machines has followed. Intel this month opened a research facility near the capital city. Despite Nokia’s cuts, the jobless rate fell from 8.5 percent in 2010 to 7.9 percent last year.

Finns have a tradition of coming up with new industries as old ones buckle. The country was built on the paper industry, which has declined as readers move online. The overnight disappearance of the Soviet export market in 1991, when Russia descended into economic chaos, helped trigger a recession and banking crisis before a Nokia-led tech boom sparked a recovery.

This time there’s no new Nokia around to boost Finland’s fortunes, so many of those leaving the mobile-phone maker are setting up their own businesses.

The Nordic nation will bounce back, says ETLA’s Ali-Yrkkoe. “Finland’s future growth will be like small streams merging into a river.”

Bloomberg