"In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility from 1st November," Nokia said in a statement.
The facility was producing handsets for Microsoft, after the software giant was unable to buy it out as part of the global $7.2 billion deal which closed in April.
Consequently, Nokia entered into a transitional services agreement (TSA) with Microsoft to meet immediate production needs and keep the factory operational.
Microsoft completed the acquisition of the mobile handset business of Nokia, leaving the Chennai plant out, at end-April this year.
According to Nokia statement, Microsoft informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from November 1, 2014.
Owing to tax disputes, Microsoft was unable to include the Nokia factory which employed close to 6,000 employees at one time.
The tax dispute resulted in the asset freeze of the Chennai plant as the income tax department last year froze the Chennai plant over Rs 21,000-crore charge over royalty payments made to its parent company in Finland. The case is being pursued by Nokia at the Supreme Court.
Nokia said it will be informing all stakeholders including the Labour Commissioner regarding the suspension.
"As a responsible employer, Nokia is currently evaluating options to minimize the impact on existing employees at the manufacturing facility. It will share further information once details have been finalized," the company added.
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