- Nokia's reported R&D retreat from China is the latest in a series of adjustments the vendor has made to shift focus to its faster-growing units
- The vendor has sold off other under-performing assets, including its FWA CPE unit to Inseego
- Nokia’s optical networks business is currently its crown jewel
Nokia’s reported abandonment of its Chinese business is the latest in a series of pivots by the vendor, as it cashes in on what CEO Justin Hotard calls the “AI supercycle.”
During Nokia’s second quarter earnings call, Hotard highlighted the vendor’s AI-RAN platform, as well as the demand that AI is creating for Nokia’s optical networks. He also noted “the integration of our Chinese operations into Nokia's global operating model after taking full ownership at the end of 2025. As we discussed previously, we continue to adjust our operating structure to reflect market conditions and improve competitiveness.”
Now it appears those adjustments entail thousands of layoffs. The closing of the vendor’s Hangzhou R&D facility and elimination of 1,600 jobs was first reported by Light Reading, and that news was followed by a report in The South China Morning Post citing sources who said Nokia will close almost all its sites in mainland China by the end of this year.
Nokia has developed mobile infrastructure in China for years, including mobile phones, a business it got out of more than a decade ago. More recently, Nokia has shed other under-performing assets, including its fixed wireless access (FWA) customer premise equipment unit, recently sold to Inseego. CFO Marco Wiren has said the firm’s enterprise campus edge business is also likely to be sold.
Overall, Nokia’s Mobile Infrastructure business is growing more slowly than its Network Infrastructure division, which includes optical networks. Nokia’s optical networks business grew 20% year-on-year in the second quarter, supported largely by cloud customers.
Nokia said its AI and cloud segment sales increases 105% year-on-year to $446 million Euros, 9% of total sales for the quarter. Investors are paying attention - Nokia shares are up 60% year-to-date.
Nokia’s Network Infrastructure unit accounted for 42% of revenue in the most recent quarter and grew 12% year-on-year. Mobile infrastructure was 55% of revenue, and that business grew 7%.
What is Nokia focusing on?
When it comes to R&D, Nokia seems to be focusing heavily on the Network Infrastructure side of the house. The company has recently introduced a multi-rail in-line amplifier solution, which will allow customers to exponentially increase the number of fiber pairs per rack. It has also launched an out-of-band management solution that uses passive optical fiber networks to replace copper. Both of these solutions are aimed squarely at AI data center operators, and both will compete with similar solutions from optical networking giant Ciena.
Meanwhile, on the Mobile Infrastructure side, hardware R&D continues at a more cautious pace. On the most recent earnings call, Hotard indicated to analysts that Nokia is backing away from proprietary base station silicon as it works more closely with AI chip giant Nvidia and focuses on software-defined solutions.
The core network side of Nokia’s Mobile Infrastructure business is much smaller than the radio access network part, and is likely still benefitting from R&D investment.
The analyst team at Omdia recently completed its annual evaluation of mobile core vendors, ranking Nokia the leader in portfolio breadth and competitiveness based on cloud-native maturity, core as a service, signaling, automation, AI/ML and analytics. But in business performance, Nokia trailed Huawei, Ericsson, and ZTE.
“A slight market share loss in 2025 and fewer 5G deals with CSPs in 2026 than in 2025 led to a degradation of the vendor’s business performance score,” according to the report, which notes that Nokia won fewer new logos than competitors in 2025 and ended the year with fewer overall 5G core commercial deals with CSPs than the other three vendors.
Omdia notes that non-Chinese mobile core vendors have some “policy-driven” advantages, particularly in the United States, the UK, Canada, Australia and New Zealand. At the same time, the analysts see Chinese vendors winning “significant 5G core deals in emerging markets, sometimes at the expense of Western vendors.”
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Nokia bets on AI supercycle as demand drives strong second quarter