Siemens deal costs BenQ customers

BenQ Corp (明基), Taiwan's biggest cellphone maker, is losing customers -- including Nokia Oyj -- as its purchase of Siemens AG's handset operation gives the Taiwanese company the strength to directly compete with industry leaders, analysts said yesterday.

"A setback in orders falls in line with our expectations," said Daniel Wang (王德善), an analyst with brokerage Primasia Securities in Taipei.

The loss of orders should be comparatively small if the Siemens deal goes through, given Siemens' good market position.

"The adverse impact would be very minor as the handsets [BenQ has been supplying] are limited to emerging markets such as China, India, or Central America. The volume should be very small," Wang said.

Wang's comment came after a Chinese-language newspaper reported yesterday that Japan's Kyocera Corp decided to cut its partnership with BenQ in the wake of the Taiwanese firm's takeover of Siemens' handset unit. Nokia was also seeking to possibly replace BenQ, the newspaper said without citing the source.

The BenQ-Siemens deal, which was announced on June 7, will make Taipei-based BenQ one of the world's top 5 mobile phone vendors.

Siemens ranked No.4 last year, with a 9 percent global market share.

BenQ has no comment on the report, spokesman Alex Liu (劉維宇) said in a statement submitted to the Taiwan Stock Exchange Corp yesterday.

Nokia, the world's top handset vendor, and Kyocera replaced Motorola Inc as BenQ's primary customers late last year after Motorola decided to end cooperation with the Taiwanese company, as it is aggressively developing its own-brand handset business.

BenQ shipped about half of the 1 million handsets it produced in the first quarter of this year to Nokia, and even fewer for Kyocera.

BenQ's handset business accounted for 16 percent of the company's total revenue last year, but the contribution is expected to skyrocket to over 60 percent in the future, company chairman Lee Kun-yao (李焜耀) told reporters when announcing the deal with Siemens.

Vincent Chen (陳豊丰), an analyst with CLSA Ltd (里昂證券) in Taipei, also foresaw the order losses that have followed the deal.

"Although BenQ has pledged to maintain its current ODM customers, such as Nokia and Kyocera, we expect these orders may not continue for long, as BenQ itself has become the de facto Siemens," Chen said in a report issued following the Siemens deal.

Chen said BenQ will need to make adjustments to counter increasingly idle equipment.

BenQ's shares fell 1.24 percent to close at NT$31.85 on the Taiwan Stock Exchange yesterday.