In short (and explained at length in the original collaboration agreement:http://www.fihmb.com/investors/Download.aspx?ID=1201
), TNS are the wholly-owned subsidiary of FIH Mobile which was set up to manage the feature phone business which FIH bought from Microsoft in 2016 (with a small part going to HMD). The intention of the strategic partnership was that HMD and TNS would work exclusively together to build the Nokia-branded phones (plus accessories and tablets!) business. TNS would be responsible for things like manufacturing, supply chain management, R&D, running the factory in Vietnam (I think), distribution and execution of marketing campaigns. HMD would have the option to buy TNS during the next 10 years. Some of that has changed recently...
The report's commentary is the interesting part, here are the key points which I think are relevant for those of us following HMD's adventure in the Nokia phones business:
- FIH will become more selective about which phones it works with HMD on and will start to refuse orders which it thinks have poor margins (note that to date FIH (or TNS, their subsidiary) has made a loss on many models of smartphone for HMD, which I think is a side effect of HMD releasing so many new models of phone in a short period of time, many at similar prices) - it's not clear if this relates only to manufacture or also to other things that TNS works on
- HMD will no long work exclusively with FIH! They are now pursuing a "multi-ODM" strategy, which means they will now be working with other companies than FIH. We will have to wait and see what this means in practice but it could mean there are more smartphone models, or more variations between the newer models. I think that all models released to date were with FIH, I presume those with other companies will be later this year
- TNS will no longer be the distributor for HMD's Nokia phones - I presume that HMD took some of this over and I think this is probably the source of the redundancies which various people have been talking about, but I don't know for certain; the rest of TNS's business seems to be intact.
- The report also contains a commentary on HMD's business, which is useful because AFAIK HMD do not release a similar financial report as they are a private company.
So, is this all a good thing? No, not really, because it means that the Nokia phones business is not as successful as either HMD or FIH had thought it would be. As well as working strategically with HMD, FIH also own part of HMD so it is in their interests for them to succeed - the fact that they are starting to refuse some orders means that things must be quite serious. Any deterioration in HMD's business means that they may not be able to continue releasing software updates for the existing models of phone, or to invest in the kind of innovation we all want to see. We have to hope that the changes to the business model of HMD succeeds in improving things.
One thing is fairly certain though - Nokia themselves are making money out of this, both through patent licensing and royalty fees on every device which HMD sell. Very clever
What are your thoughts on this?