Alcatel signed a memorandum of understanding with Singapore-based Flextronics, for the manufacturing of 3G mobile phones in Europe. As part of the pact, Alcatel will transfer its Laval, France production site to Flextronics, who also has a similar deal with Ericsson.

The move marks a clear trend for outsourcing handset manufacturing. As profit margins shrink, vendors are now looking to outsource their production process to low-cost centers and third party specialists who can take advantage of economies of scale and make a profitable business model.

The official transfer of Alcatel’s assets to Flextronics is expected to take place by the end of June, when a final agreement will be signed. About 830 Alcatel employees at the Laval site will be transferred to Flextronics.

Alcatel will keep its China-based handset manufacturing plant to produce next generation handsets, the company said.

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last updated: January 12, 2004

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