Nokia, the world's top cellphone maker, said on Thursday India overtook the United States in the second quarter to become its second-biggest market by sales after China.

Nokia shipped 60 million handsets from its factory near the southern Indian city of Chennai in the 18 months to August, and CEP and President Olli-Pekka Kallasvuo expects demand to remain strong as India's user base surges.

India has quickly become one of the largest markets, he told reporters in New Delhi, adding he expects demand will not be limited to low-cost phones.

Globally, Nokia sold 100.8 million phones in April-June and, according to research firm Gartner, had a market share of 36.9 percent.

The Finnish firm reaffirmed that Nokia Siemens Networks, its joint venture with Siemens, would invest $100 million in India over the next three years.

Kallasvuo is on a three-day visit to India to meet government officials, clients and component suppliers.

Nokia had earlier said it expected India to become its No.2 market by volume by 2010, if not sooner.

Last week, it warned consumers that 46 million batteries used in its mobile phones could overheat, and offered to replace them for free while it negotiates with battery maker Matsushita on who would bear the costs.

We are not giving out estimates on the cost of this exercise as a whole. But of course we feel Matsushita as a supplier is responsible to us, Kallasvuo said.

Nokia, which makes more than a third of the world's phones, has set up a design studio in India, the first in a series of global satellite studios to develop ideas for emerging markets.

Seven global component makers have invested $500 million in the Nokia Telecom Park near Chennai and are likely to employ more than 30,000 people when fully operational, Nokia has said.

Nokia employs 9,000 people in India -- up from 450 in 2004 -- and would continue to invest in India, Kallasvuo said, adding that production can be enhanced as demand grows.

India is not a low-end market. It is a very versatile market in all price points, in all segments, he said.

Nokia exports half its India production to 58 countries in the Middle East, Africa and Asia-Pacific.

But competition is also rising in the world's fastest-growing cellphone market. India had 185 million mobile customers at end-July, with more than 6 million new customers signing every month, lured by call rates as low as 1 U.S. cent a minute.

Motorola Inc and Sony Ericsson have stepped up their presence, while Samsung Electronics and LG Electronics also compete.

(Additional reporting by Helsinki Newsroom)

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