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Siemens plans to up outsourcing to local companies

German communications giant Siemens AG plans to step up the farming-out of manufacturing to Taiwanese companies this year after adding networking equipment onto its major outsourcing items, a company official said yesterday.

Siemens ICN, the company's information and communications affiliate, purchased heavily from Chinese suppliers in the past, but is now seeking more local outsourcing partners by arranging two days of meetings in Taipei that began yesterday.

"The move aims to expand our local procurement, as Taiwanese companies have greater flexibility in product delivery and pricing," said Leslie Lok (駱一華), president of Siemens' Taiwan branch, at a press conference.

Siemens purchased about 1.1 billion euros (US$1.35 million)worth of goods last year, of which 800 million euros were spent on information-technology goods, making it one of the top 10 foreign electronics buyers last year, Lok said.

"This year, the amount will certainly go up in line with the growth of the global networking business, which is expected to recover from the slump over the past three years," he added.

Siemens ICN has budgeted 300 million euros for its procurement this year from the Asia-Pacific region, said Lok, who declined to specify the share for Taiwanese suppliers.

Last year, multinational electronics vendors spent US$48.5 billion on electronics hardware from Taiwanese makers, according to the government's tally.

Siemens plans to farm out productions of communication equipment including switches and broadband access, said Tao Zhu (朱陶), general manager of China Information and Communication Networks Group of Siemens Ltd, who is leading a nine-member team to Taipei looking for potential partners.

Siemens ICN said its revenues stood at 7.1 billion euros during its 2003 fiscal year ending Sept. 30 last year.

Siemens' current asymmetric digital-subscriber-line (ADSL) modem suppliers -- Ambit Microsystems Corp, a networking manufacturing arm of Hon Hai Precision Industry Co (鴻海精密), and Askey Computer Corp (亞旭電腦) -- have high hope of extending their existing partnerships, said Chris Tan (譚志忠), an analyst at Yuanta Core Pacific Capital Management (元大京華投顧).

"Huge capacities and strong bargaining power make Ambit and Askey Siemens' first pick," said Simon Hsu (徐玉學), a communications analyst at market researcher Topology Research Institute (拓墣產業研究所).

To meet the demand for ADSL modems with sophisticated functions in markets with high broadband penetration, Siemens is likely to expand its local supplier base by adding smaller companies, Hsu said.

Topology has said the global ADSL modem market should rise 17 percent to 28.7 million units this year, from 24.5 million units last year.
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