Nokia is pulling away from using subcontractors in phone-making process. The move will shed more than $5 billion in revenue from electronics contract manufacturers.

In a statement, iSuppli analyst Adam Pick said “This announcement clearly illustrates just how severe the situation in the mobile handset market really is.” The world’s top cellphone maker Nokia said on Thursday it has fully stopped using subcontractors in manufacturing of its mobile phone engines, which include the phone and software that enable its basic operations.

Through the decision, iSuppli said it would cut its view for the electronics subcontracting market, which it has earlier forecast to shrink 10 percent in 2009 to $270.8 billion. Nokia said in January it aimed to cut annual costs at its key handset unit alone by more than 700 million euros to counter plunging demand. From this is seems that using outsourced contracting would be based on demand.

[via PhoneScoop]