Nokia's Two-Front Strategy: Exiting China While Betting Big on US Chip Manufacturing

Nokia winds down China operations amid revenue decline, pivots to US optical chip production with $4B investments in Arizona and California.

The Finnish telecom equipment maker is executing a geographic rebalancing of unusual scale, winding down nearly all of its mainland China operations while simultaneously pouring billions into American semiconductor production. The contrast could hardly be starker: one hand closing R&D centers in Hangzhou, the other signing deals for chip fabrication plants in Arizona and California.

Nokia confirmed on Wednesday that it is shrinking its operational footprint in China to align with its global business model, citing persistent declines in regional revenue. The company declined to specify how many employees would be affected, but reports from Reuters and the South China Morning Post indicate the plan involves shuttering virtually all mainland locations and research facilities by the end of 2026.

The numbers behind the retreat tell a sobering story. Nokia employed roughly 7,200 people in Greater China — including Hong Kong and Taiwan — at the end of 2025, down from 13,700 in 2020. Regional revenue has collapsed from €2.2 billion in 2018 to just €913 million last year. The Hangzhou research center alone employs around 1,600 people, and only after-sales service is expected to remain in the country.

Nokia points to intensifying competition from Huawei and ZTE — which, together with Ericsson, Samsung, and Nokia itself, control roughly 96 percent of the global RAN market — as a key driver. CEO Tommi Uitto has also noted that China is increasingly excluding Western network equipment vendors on national security grounds, adding a geopolitical dimension to what is also a commercial decision.

A Tale of Two Trading Sessions

Investor reaction has been split across two sessions. On Tuesday, shares on the Nasdaq Helsinki fell around 3.6 percent to €9.02. Wednesday brought a partial recovery, with the stock trading at €9.12, up 1.2 percent — though the primary source article reports a 3.0 percent decline to €8.75 on that same day, reflecting intraday volatility around the China announcement.

The stock remains roughly 8.9 percent below its 50-day moving average of €10.02, while trading comfortably above its 200-day average of €8.16. Over the past week, the shares have shed about 3.5 percent, though the stock remains firmly in positive territory for the year.

Building America's Optical Chip Future

While the China exit dominates headlines, Nokia's US expansion is gathering momentum. In early August, the company signed a definitive agreement to acquire NXP Semiconductors' Chandler semiconductor fabrication campus in Arizona. The facility is slated to shift to producing indium phosphide-based chips for optical communications by 2027, with the transaction expected to close in the first quarter of 2029.

Separately, production at the San Jose, California fabrication plant — acquired through the Infinera deal — is scheduled to begin in the fourth quarter of 2026. These investments, totaling $4 billion in the US, signal a strategic bet on optical chips and AI infrastructure as the growth engines of the future.

Analysts See Upside That the Market Is Missing

JPMorgan's Sandeep Deshpande has reiterated an "Overweight" rating on Nokia with a €18 price target, calling the stock a top pick. His view: the consensus underestimates how strongly the order book supports earnings estimates for 2027 and 2028, driven by Nokia's positioning in AI and cloud plus market share gains in IP networking. For the US listing, JPMorgan calculates a price target of $21.

Independent validation arrived from Omdia, which ranked Nokia first among twelve vendors in its "Market Landscape: Core Vendors" report for the second consecutive year, awarding top marks across all seven categories examined, from cloud-native maturity to AI and machine-learning capabilities. Nokia also points to the world's first commercial 5G core solution delivered as software-as-a-service.

Insider Confidence and Institutional Moves

Mid-August brought a notable vote of confidence from within: senior managers including Raghav Sahgal, Stephan Prosi, and Victoria Hanrahan purchased shares on the Helsinki exchange at €9.091 each. Institutional investors are also positioning — Bank of America increased its Nokia stake by 105.2 percent in the first quarter to over 2.4 million shares.

In Southeast Asia, Nokia launched the "Zankore" AI infrastructure platform in early August alongside Indosat Ooredoo Hutchison and NVIDIA, targeting gigawatt-scale capacity for NVIDIA DGX AI factories.

The picture for investors is genuinely two-sided. The China retreat eliminates low-margin business and removes a source of persistent drag, while the US chip investments and AI partnerships point toward a leaner, more technologically focused company. Whether the strategic pivot translates into improved profitability is a question that will likely dominate the coming quarters' earnings calls.