Benq banks on Motorola

Benq Corp (明基電通), the nation's largest maker of mobile phones, said yesterday that unit shipments would rise as its biggest customer, Motorola Inc, gains market share.

"The shipment quantity to our major customer is increasing this second quarter. The first quarter we shipped around 3.1 million units and in the second quarter we will ship around 4.4 [million units] or 4.5 million units [to all customers, including Motorola]," said Alex Liou (劉維宇), vice-president at Benq's financial department.

US-based Motorola, which ranks second to Nokia in world mobile phone sales, said second quarter sales would meet or beat expectations and it would outsource more manufacturing to further reduce costs.

"[Motorola] is already gaining market share in handsets. I think their market share has gone up from 13 percent [of the worldwide mobile market] to over 15 percent," Liou said.

Analysts said rising shipments to the US giant would continue to benefit Benq as well as Compal Communications Inc (華寶通訊), a subsidiary of Compal Electronics Inc (仁寶電腦), Taiwan's second-largest contract maker of notebook computers, which signed a contract last year to produce next-generation GPRS handsets for the company.

Shares of Benq rose 5.3 percent to NT$59.5 on the Motorola news. The company's stock price has been battered lately on fears retailers have too much inventory sitting on store shelves and in warehouses, and that orders would slow as a result.

Monthly revenue statements from Benq at first seemed to bear out negative sentiment, as sales at the firm dropped nearly 5 percent from April to May. The company reported sales of NT$7.9 billion in May, versus NT$8.3 billion the month before.

Liou said Benq would sell 13 million handsets this year but that the average selling price is dropping. "In the IT industry, the price trend is always down," he said.

"If you look at the [original design manufacturers] in Asia, Benq has done a pretty good job," said Tony Tseng, electronics analyst at Merrill Lynch in Taipei. Design manufacturers create new handset styles as well as make them for customers, as opposed to other contract manufacturers that simply produce goods based on specifications provided by customers.

Tseng said Merrill Lynch had revised down their global handset shipment expectations a few days ago, but that it had maintained its growth forecast for Motorola.

He also said Motorola would likely increase orders to Taiwan because of the Compal Communications contract.

Compal is to provide Motorola with second-generation mobile phones made for mobile Net surfing, dubbed GPRS or general packet radio service. Snags involved with creating a GPRS phone with a color screen slowed progress on the deal. Color screens tend to drain batteries faster.

At this year's Computex Taipei, Compal showed off a few GPRS handsets with color screens that allowed for only around 3 hours of talk time.

Tseng said it is still too early to predict whether or not GPRS phones will take off since few people have yet to use the system.

"It will depend if consumers like the [mobile Net services] offered by companies," he said.

The Market Intelligence Center, a publicly funded research group, also painted a rosy picture of Taiwan's mobile phone manufacturing this year. It said cellphone shipments rose 186 percent from the same time last year to 4.4 million units, while the value of sales increased almost three-fold, to US$301 million, in the same time frame.