Finnish telecom equipment maker Nokia is walking away from mainland China after two decades of building out its networks there, closing nearly every remaining site by year-end in the clearest sign yet that Europe and China are severing their telecom supply lines.
Nokia is closing its research and development site in Hangzhou, cutting about 1,600 R&D jobs, and shutting additional offices in Beijing, Chengdu, Qingdao and Shanghai, according to Light Reading. What remains will be folded into Nokia Shanghai Bell, the joint venture Nokia fully bought out in late 2025, leaving a much smaller China presence focused on serving existing customers rather than developing new equipment locally.
The development came after Nvidia acquired a 2.9% stake in Nokia for US$1 billion last year, part of a partnership between the two companies to build artificial intelligence (AI)-powered 6G network technology and help the United States reclaim leadership in telecommunications infrastructure.
The rupture dates back to late 2020 and early 2021, when Finland and Sweden barred Huawei Technologies and ZTE from their 5G networks, citing national security concerns.
Washington had acted earlier. In 2019, the United States barred Huawei and ZTE from federal telecom infrastructure contracts under a defense procurement law, and pushed the European Union to adopt a bloc-wide restriction. European countries did not move as one, splitting instead over how much risk the Chinese vendors actually posed.
The United Kingdom briefly allowed Huawei into non-core 5G equipment before reversing course in mid-2020 and ordering it stripped from British networks by 2027. Germany opted for tougher vetting of all vendors rather than naming Huawei outright, while Hungary embraced the company fully, rejecting Washington’s push altogether.
In the years after the 2020 ban by Helsinki and Stockholm, Beijing tightened scrutiny of Nokia’s and Ericsson’s bids for contracts with China’s state-run carriers, formalizing the squeeze in 2022 when the Cyberspace Administration of China (CAC) began subjecting such purchases to opaque “black box” security reviews that gave the two European vendors no insight into how their equipment was assessed.
Nokia’s China revenue and regional headcount have both roughly halved since 2018. Ericsson has fared similarly, with its China sales down by more than half and its local workforce cut by about a third.
Some Chinese commentators warn that Nokia’s exit will hurt China by causing job losses and closing off a channel for international technology collaboration that domestic firms cannot easily replace.
“Nokia’s retreat from China is nothing worth celebrating,” says a Jiangsu-based columnist using the pen name “Xiaozaojun.” “The most direct impact is the loss of thousands of jobs. Once the Hangzhou research and development center shuts down, an estimated 1,600 employees will face layoffs or reassignment, and that means 1,600 families under real financial pressure.”
“Many assume Huawei and ZTE will simply absorb this talent, but both companies have also tightened their own hiring. Employees used to the pace of a foreign company like Nokia are not necessarily what Huawei and ZTE are looking for right now,” he says. “These layoffs will also drive down wages and strain suppliers farther down the industry chain.”
He says Nokia’s departure will deepen industry fragmentation and leave China’s supply chain more reliant on a single source. He adds that the country’s manufacturing capacity and technology should remain engaged with global markets, while Chinese firms should continue expanding abroad.
“Decades of China-Europe collaboration once anchored global mobile standards, but a rising challenge from North America, sharpened by the AI wave, now risks splintering those standards,” he says. “We must think carefully about how to deal with this situation.”
Chinese state media criticized Nokia’s decision to leave China and took aim at Nokia Chief Executive Justin Hotard, who said last September that the European Union should reconsider why it allows Huawei and other “high-risk vendors” into its telecom networks, even as China keeps Nokia’s market share below 3%.
“Hotard’s framing distorts the truth,” says Lai Jiaqi, a columnist with Guancha.cn. “Chinese telecom carriers actually want more equipment vendors to take part, since healthy competition in the bidding process helps raise technical standards and service quality, while also securing more cost-effective products.”
“Western countries have used political means to suppress Chinese companies and hurt the feelings of the Chinese people, while Western firms hold no advantage in technology, service or price,” she says. “A decline in their China market share should come as no surprise.”
She says the Hangzhou closure has raised investor concern about Nokia’s future competitiveness as the company adjusts its supply chain and relocates some research and production capacity amid geopolitical pressure.
Nokia’s quiet revival
The general public may see Nokia and Ericsson as old-fashioned companies that lost to Apple and Samsung in the smartphone battle of the 2000s. But in fact, the two firms have spent the past two decades restructuring around telecom infrastructure and have regained growth momentum.
Both companies built their global reputations on radio access network equipment, the base stations and antennas that carry mobile signals, along with internet protocol (IP) routing and optical networking gear, the same technology base they once sold widely across China.
Last September, Fierce Network, a US telecom industry publication, reported that China may label Ericsson and Nokia as untrusted vendors, a retaliatory step that would mirror the West’s own restrictions on Huawei and ZTE.
John Strand, president of Strand Consult, was quoted in the report saying that China branding Nokia or Ericsson as “untrusted” could further blunt their market share in regions like Africa and Latin America, where Huawei and ZTE are already the favored vendors for telecom deployments. He added that Nokia and Ericsson already do not sell to Russia, North Korea or Iran.
Daryl Schoolar, an analyst at Recon Analytics, said that if Western vendors are locked out of China while Chinese vendors are locked out of Western countries, there would be less incentive for the two sides to work together. He said the industry could see a return to region-based standards, similar to what happened during the 3G era.
“Being labeled ‘untrustworthy’ would hurt Ericsson and Nokia far beyond the Chinese market,” says a Hubei-based writer. “Losing China as a revenue source would reshape their long-term strategy. While both companies may speed up moving their supply chains out of the country, a full withdrawal would be costly and complicated.”
Amid rising Sino-European tensions, Nokia’s presence in China has shrunk steadily over the past several years. Its Greater China revenue fell from US$2.5 billion in 2018 to $1.06 billion last year, while its regional headcount fell from 13,700 in 2020 to about 7,700 last year. Ericsson’s China revenue fell from $2.8 billion in 2020 to $1.2 billion last year, as it cut about a third of its local workforce, roughly 3,500 jobs, over the same stretch.
As of now, Ericsson has not decided to leave China entirely, as it sees the Chinese market as a key stepping stone to broader emerging markets. Some observers say Nokia’s decision to close all its China sites may force Ericsson to fine-tune its own strategy, especially when Washington pushes technology giants to pick a side between the rival AI camps led by China and the US.
Nvidia acquired a 2.9% stake in Nokia for US$1 billion last year to jointly develop new technology for the radio access network (RAN), the base stations and antennas that carry mobile signals. Their approach, called AI-RAN, adds AI processing to that same equipment. It runs on Nvidia’s ARC-Pro computing platform, combined with Nokia’s radio technology and Dell servers, and T-Mobile plans to trial it in 2026 as a step toward 6G. ARC refers to Aerial RAN Computer, a server platform that processes both radio signals and AI workloads on the same Nvidia chips.
Nokia has redirected investment elsewhere. In August 2024, it said it would expand its Chennai, India research lab into one of its largest facilities worldwide. In June this year, it announced a US$30 million upgrade of its Allentown, Pennsylvania site to boost production of chips used in AI-driven optical networks, nearly doubling the site’s workforce to more than 500.
Read: Half-trillion Nvidia chip financing threatens China AI ambitions
Follow Jeff Pao on X at @jeffpao3
