Cross-strait deals set to expand

Beijing-based Legend Holdings Ltd (聯想) and its rival handset makers in China are likely to deepen their partnerships with Taiwanese manufacturers in pursuit of further cost savings, analysts said yesterday.

In a market with 36 Chinese and international brands, "Chinese vendors, especially electronics companies such as Legend, need to rely on cost-efficient manufacturing to stay competitive," said Ben Huang (黃振邦) of the Topology Research Institute (拓墣產業研究所).

Huang said Taiwanese manufacturers, which are more flexible in their pricing policies, are preferred over South Korean companies. Both Legend and TCL Corp are reportedly aggressively seeking cooperation with Taiwanese companies, he said.

Legend, the No.1 electronics maker in China, expanded into the cellphone market in the middle of last year and aims to secure a significant share of China's booming, yet crowded, handset market.

The company is likely to extend its close partnership with local original equipment manufacturers (OEM) such as Quanta Computer Inc (廣達電腦) and Compal Electronics Corp (仁寶) into the mobile-phone sector, according to Huang.

Legend was rumored to be expanding its Taipei office in response to its increasing demand for consumer electronic goods from its Taiwanese partners. But Jesse Lu (盧建軍), head of Legend's Taipei office, dismissed the report.

Legend bought nearly US$1 billion worth of electronics from local firms last year. Total foreign procurement from Taiwan amounted to US$45 billion last year, according to the Ministry of Economic Affairs.

Another mobile communications researcher said she was unaware of Chinese handset vendors deepening their partnerships with Taiwanese OEM companies.

"I don't see any changes. They are just shopping around," said Ann Liang (梁嘉鈴) at Gartner Inc in Taipei.

Taiwanese mobile-phone suppliers are gradually realizing that profits are not guaranteed when making phones for big names such as TCL and Ning-bo Bird Co (波導) on small-volume orders and low margins, Liang said.

"The poor credibility of Chinese companies has soured the partnership," Liang said.

Instead, local companies are glad to see more orders from China's second-tier phone brands, she said.

Benny Lo (盧志恆), an analyst at Primasia Securities Co in Taipei, said Chinese handset makers will seek cooperation with Taiwanese mobile-phone OEMs initially to enhance research and development strength.

Orders from China for Taiwan-ese contract makers are small compared to those from US, European and Japanese mobile-phone brands such as Motorola, Siemens and Panasonic, Lo said.

The analyst expects Taiwanese handset maker Compal Communications Inc (華寶通訊), a subsidiary of Compal Electronics, to have a better chance than BenQ Corp (明基電通) of winning orders from China.

Compal Communications makes phones for China's home appliances giant Haier Group (海爾).