Slowdown hits mobile phone outlets

Popular mobile phone retailer Aurora Corp (震旦行) said yesterday it will close a third of its 300 sales outlets and reassign workers to businesses due to slowing demand.

The firm has already cut the number of employees in its shops from 1,000 down to 600 this year, according to company spokesman Robert Chien (簡壽宏). Aurora also plans to reduce stores by franchising itself out.

"We'll reduce stores where the number of customers is dwindling and the local economy is poor,'' Chien said. Employees who didn't resign or retire were moved to other stores selling office machines such as photocopiers, he said.

Aurora's net income in the first three months of the year fell 85 percent from a year ago to NT$86 million (US$2.6 million). It lost NT$468 million in the preceding two quarters. Shares in the company fell as much as 1.5 percent, to NT$33.30 in early trading yesterday.

Overly enthusiastic market demand estimates and the slow uptake of second generation mobile Internet services, general packet radio service or GPRS, have combined with an already over-saturated mobile phone market to dampen sales in the local market this year.

The mobile phone penetration rate in Taiwan already stands at over 80 percent, with 18 million mobile phone accounts running. With so many people already holding mobile phones and no real reason to upgrade, the local market is stagnating.

Mobile phone operators from Far EasTone Telecommunications Ltd (遠傳電信) to Taiwan Cellular Corp (台灣大哥大) promised last year to launch GPRS mobile services earlier this year but put those plans on hold due to a lack of handsets. GPRS-enabled cell phones are expected to hit the Taiwan market in the second half of the year.

The combination of these factors leaves Aurora and other mobile phone distributors hurting. Demand for new phones is not expected to pick up until consumers see value in the GPRS systems.

In related news, sales forecasts of OEM manufactured mobile phone handsets were slashed by 40 percent this year. Originally estimated at 47 million units, handset manufacturers cut their estimates earlier this week to a revised 27.3 million units.

This prediction, made by the Commercial Times, is optimistic compared to the revision put out by the government sponsored Institute for Information Industry (資策會). The institute says Taiwanese manufacturers will sell only 18 million handsets.

Phone-makers Dialer & Business Electronics Co Ltd (DBTel, 大霸電子) and Inventec Corp (英業達) introduced the largest cuts in their mobile phone shipment targets. Inventec scaled down its handset shipment target from one million units previously to 500,000 handsets. The company also admitted it was not sure it could even reach the lowered target.

DBTel vowed earlier this year to deliver up to 16 million handsets this year, an ambitious claim which has attracted skepticism. Analysts believe the firm will only deliver seven million handsets in 2001, less than half the company's forecast.

Separately, Acer Communications & Multimedia Inc, (明電), Compal Electronics Inc (仁寶) and Arima Communication Corp (華宇) have slashed their handset shipment forecasts by 40 percent.