Chi Mei ships handsets for Motorola

Chi Mei Communication Systems Inc (奇美通訊), a local mobile phone manufacturer with more than 50 percent of its stake held by the Chi Mei Group, began shipping hand-sets for Motorola Inc, making the Taiwanese firm the third local partner tied to the US-based mobile phone giant, industry sources said yesterday.

As early as 2000, Motorola Inc started to outsource handset manufacturing to Taiwanese companies BenQ Corp (明基電通) and Compal Communications Inc (華寶通訊) on a contract basis, in an effort to lower production costs.

Now Chi Mei Communication has become the third Taiwanese company to benefit from partnership with the world's second-largest mobile phone brand.

"This is impressive news for Chi Mei Communication," said Stevie Chou (周奇賢), a telecom industry researcher at SinoPac Securities Corp (建華證券), "because the company only engaged in limited contract manufacturing and some research and development projects over the past two years."

Close cooperation

Chi Mei Communication was established in April 2001 with NT$1 billion in initial capital. The company's general manager, Chih Yu-yang (池育陽), used to serve as a senior executive at BenQ's wireless business unit.

Chih's research team of 100 technicians have worked closely with Motorola and they have experience developing advanced handsets, Chou added.

Therefore, unlike BenQ and Compal who produce mostly standard handsets for Motorola, Chi Mei Communication is positioned to focus on advanced mobile phones, he said.

However, another analyst said Motorola's order may bring very little help to Chi Mei.

"As the short-term outlook for the telecom market is foggy, phone companies are very conservative in placing orders," said Roger Yu (游智超), an analyst at Polaris Securities Co (寶來證券).

Therefore, Chi Mei is expected to initially ship only a small amount -- perhaps 100,000 handsets -- per month, he added.

Opposition

Furthermore, Chi Mei Communi--cation's move could squeeze its competitors.

"Motorola and other international handset companies are not expected to release many more orders under the current market conditions, therefore competition between Taiwanese makers will be tougher," Chou said.

Taiwan is expected to manufacture up to 20 million handsets for Motorola this year, of which BenQ accounts for 50 percent, he added.

Motorola has already outsourced nearly all entry and middle-level handset production, and is less likely to outsource premium handsets such as third-generation (3G)-enabled mobile phones, according to Chou.

Meanwhile, Motorola will feature its first dual-module 3G handset, A835, for the Telecom and Networking Show to open tomorrow at the Taipei World Trade Center. During the show, Motorola will also present a new color-screen model V690, which includes a camera and is the first mobile phone manufactured by Chi Mei.

In order to make the move to 3G easier for consumers, service operators intend to use dual-mode handsets that allow subscribers to switch from current mobile systems to a 3G network more easily.