Ericsson is to stop making mobile phone and hand over all production to contract manufacturer Flextronics in April. The move will affect 700 jobs in the UK and Europe.
The news came as Ericsson posted a wider than expected loss and warned of a weak year ahead. The phone supplier posted a pre-tax loss of SEK2.6bn for its fourth quarter, compared to an expected loss of SEK125m. It also cut its forecast for global mobile phone demand to between 500 and 540 million units in 2001.
Ericsson said it plans to move handset manufacturing from its sites in Sweden and other countries to Flextronics's lower-cost facilities in south-east Asia. Initially Flextronics will take over Ericsson's UK plants in Carlton and Scunthorpe, plus facilities in Sweden, Brazil, Malaysia and the US.
Although Ericsson plans to keep its research and development facility in Basingstoke, as well as others in Sweden and the US, 100 jobs will be axed from the UK plant. Around 4200 staff will join Flextronics but a further 600 jobs in Sweden will go.
The goal is to cut headcount in Ericsson's consumer products division from 16,800 at the end of last year to 7000 by the end of 2001, explained the company.
Jan Warbey, the division's executive vice-president said: "In light of a significant change in the world market for mobile phones we have decided to fundamentally change the set-up of our business."
He added: "The alliance with Flextronics will enable us to achieve economies of scale and volume flexibility."
Flextronics is one of a number of contract manufacturers that are reaping the rewards from developers that are finding it too costly to both design and make products.
Last year Flextronics signed a $30bn deal with Motorola to manufacture its wireless and networking equipment, while networking supplier, Cabletron sold its manufacturing and repair plant to Flextronics for $100m.
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