World-leading mobile phone maker Nokia will cut 4,000 jobs at its smartphone manufacturing facilities in Finland, Hungary and Mexico by the end of 2012, it said.
"The expected headcount impact by country is 2,300 in Komarom (Hungary), 700 in Reynosa (Mexico) and 1,000 in Salo (Finland)," company spokesman James Etheridge said.
The job cuts follow a review of smartphone operations announced in September 2011, when the company warned jobs may be cut at the plants in question.
The factories in Komarom, Reynosa and Salo will in the future focus on software-heavy smartphone customisation, while manufacturing will shift to Asia to shorten the time it takes for products to get to market, the company said in a statement.
"But these planned changes are all about speed and responsiveness and ultimately, our competitiveness," Etheridge said.
The job cuts come as Nokia struggles to secure a foothold in the fiercely competitive smartphone market, with its newly-launched flagship line Lumia failing to correct falling sales in its overall smartphone business.
Nokia's comeback fight comes amid a dynamic and differentiated market, with many players offering consumers a variety of options, said Horace Dedieu of the Helsinki-based mobile industry blog Asymco.
"My initial impression is that it's a good product, but, right now, being good isn't enough," Dedieu told Finnish state broadcaster YLE about the Lumia.
In its 2011 full-year earnings report released two weeks ago, Nokia said it had sold "well over one million" Lumia phones since their launch in October in Europe, Hong Kong, India, Russia, Singapore, South Korea and Taiwan. They are set to launch in the next few weeks in New Zealand.
However, others have noted that while the Lumia has received good grades from users, not enough are buying the new smartphone.
The phone's fledgling reputation has also already been tainted by reports of returns due to battery life problems.
Moreover, users ranked Apple's iPhone above the Lumia 800 in a small scale usability comparison recently conducted by researchers at Finland's Abo University and published last week.
"Seven out of 10 test users chose the iPhone as a whole over the Lumia," the results concluded.
That is bad news for the former undisputed world leader, which is desperate to stop the haemorrhaging of its market share.
The company announced last year it would no longer provide market share figures, which peaked at 40 per cent in the first half of 2008, but analysts estimate Nokia today holds only about 25 per cent.
Nokia is depending heavily on its partnership with Microsoft and the new phones to help maintain its ranking as the world's largest mobile phone maker, as RiM's Blackberry, Apple's iPhone and handsets running Google's Android platform take growing bites out of its market share.
If Nokia's Lumia fails to make an impression this year, the struggle to regain traction in the smartphone segment will be lost, mobile technology analyst Ari Hakkarainen told AFP.
"The next two Lumia models will make or break it for Nokia, they need to come this year, and they need to come soon" to build momentum, he added.
In the fourth quarter, Nokia sold just 19.6 million smartphones - 31 per cent fewer than in the same quarter of 2010 and far behind market-leader Apple, which reported 37 million units sold, and runner-up Samsung, which announced 36.5 million smartphone sales in the quarter.
Nokia registered a net loss of 1.2 billion euros in 2011, compared to a net profit of 1.8 billion euros a year earlier, while the final quarter of the year was hammered with a 1.07-billion-euro net loss after a profit of 745 million in the same period a year earlier.