Wed, May 03, 2006 - Page 12 News List

BenQ looking to become a global presence

INTERCONTINENTAL The recent merger with Siemens may help the firm in Europe but the lucrative US market may prove to be a tougher nut to crack

NY TIMES NEWS SERVICE , TAIPEI

BenQ president Sheaffer Lee holds a BenQ-Siemens cellphone at BenQ's headquarters in Taipei in this March photo. The phone symbolizes the relationship between his company and Europe's Siemens, which paid BenQ to take over its ailing handset division last year. Designed in Germany and Taiwan and built in Europe, the limited-edition phone, Lee said, aims to blend the passion of the East with the rationality of the West.

PHOTO: NY TIMES NEWS SERVICE

Sheaffer Lee (李錫華), president of BenQ Corp (明基), loves to show off his company's mobile handsets. His favorite is the EF81, a slim, rectangular folding phone with a black metallic back and a gold-plated front embellished with calligraphy from a well-known Tang dynasty poem.

The phone is one of Lee's favorites, not just because of its styling but also because it symbolizes the relationship between his company, one of Taiwan's largest electronics makers, and Europe's Siemens, which paid BenQ to take over its ailing handset division last year. Designed in Germany and Taiwan and built in Europe, the limited-edition phone, he says, aims to blend the passion of the East with the rationality of the West.

"There's a lot of synergy between the European and Asian way of thinking," Lee said. "How to make those synergies is the big question. It will take time."

The question is whether consumers and investors will also have patience. BenQ, whose cell phone division primarily made handsets for big companies like Motorola, formed the intercontinental venture with Siemens so it could sell its own branded phones beyond Taiwan and China. But by trying to reach consumers elsewhere, BenQ now competes more directly with the companies it used to sell to, and some are taking their business elsewhere.

Indeed, BenQ must do battle with the Big Five -- Nokia, Motorola, Samsung, LG and Sony Ericsson -- which control about 80 percent of the global handset business and are increasing their share of the market at the expense of smaller players like Siemens.

BenQ is undeterred.

Handset sales worldwide are growing enough that everyone can get a piece of the pie, Lee said.

The company also hopes to marry the expertise it gained mass-producing phones for others with the distribution system and brand recognition that Siemens has built in Europe.

In effect, BenQ wants to duplicate Sony and Ericsson's cross-border success, or become the next Samsung, which has transformed itself into a chic global brand.

The first step toward reaching that goal will be cutting losses at Siemens. While BenQ is obligated to meet Siemens' commitments to its German workers through next month, the company has said little about what it will do after that. Some manufacturing, for instance, could be shut down or moved to Asia, analysts say.

Overall, BenQ expects that as soon as this quarter it will start winning back some of the market lost by Siemens, whose share has fallen to 4.7 percent worldwide from 8.4 percent in 2003.

BenQ has pinned its hope on cell phones because of their healthier growth prospects. Worldwide handset sales, for instance, jumped 21 percent last year and are expected to grow an additional 28 percent, to 1.04 billion phones, by 2009, according to forecasts by Gartner, a market research firm.

No matter how good its phones are, BenQ must still persuade carriers to sell them. The company works with carriers in Taiwan and China, and Siemens' customers in Europe and elsewhere. (BenQ can use the Siemens name for five years.)

But in the US, one of the world's largest and most competitive markets, Siemens and BenQ face an uphill battle. The mergers between Cingular and AT&T Wireless and between Sprint and Nextel have given carriers more power to negotiate deals with handset makers. To meet their demands, manufacturers try to make up the difference by selling more phones.

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