Workers at Nokia's Chennai factory in south India went on strike on Tuesday, demanding higher wages.
The factory is a key hub for the manufacture of mobile handsets and employs 8,000 workers. Nokia officials declined to comment on the impact the strike would have on production of phones.
The strike follows negotiations on Monday between Nokia and the local union, Nokia India Employees Progressive Union (NIEPU), for a long-term wage settlement, which Nokia said was close to being finalized.
Nokia said in a statement that the wages being offered are among the highest in the region in similar industries.
Nokia appeared to have resolved in the current negotiations another contentious issue when it offered to revoke the suspension of 60 workers. The company suspended 60 Chennai factory employees in January on charges of misconduct.
About 1,200 workers then went on strike in protest of the suspensions. Nokia said it would use other factories it has globally to avoid disrupting production.
India's manufacturing sector has strong trade unions unlike the software services and business process outsourcing industries.
The proposed settlement on Monday between Nokia and the NIEPU was rejected by a faction within NIEPU opposed to the new leaders of the union, according to sources who declined to be named.
NIEPU is currently under the control of the Labour Progressive Front (LPF), a union that is affiliated to the ruling DMK (Dravida Munnetra Kazhagam) party in Tamil Nadu state of which Chennai is the capital. NIEPU and LPF were not immediately available for comment.
CITU (Centre of Indian Trade Unions), a large leftist trade union, supports the strike at Nokia, said A. Soundararajan, the union's general secretary in Tamil Nadu, on Wednesday.
Nokia had a 54.1 percent market share in India of units sold in 2009, according to research firm IDC India.