Benq plans to make a third of its cellphones in China

Benq Corp, Taiwan's largest mobile-phone maker, said it plans to make about a third of its handsets in China this year after the Taiwan government scrapped restrictions on mainland manufacturing.

"Handset production in China will put us closer to supporting the mainland market," Financial Controller Alex Liou said in an interview. "In the long term, costs will also be lower." Taiwan's decision in November to end a ban on mobile-phone makers setting up factories in China allows Taiwan handset makers to tap into the world's biggest cellphone market as sales elsewhere in the world decline.

Benq, whose customers include Motorola Inc, forecasts its handset shipments this year may increase to 10 million from 6.8 million in 2001 as Taiwan cellphone makers set up production in lower-cost China, increasing their ability to attract more orders.

"The trend to outsource to Taiwan handset makers will continue," said Michael Wang, who helps manage about NT$6 billion (US$171 million) in stocks at Ta Chong Investment Trust (大眾投信). "Taiwan has the production base and the supply chain in China to make the phones" at lower costs.

Last month, Hon Hai Precision Industry Co (鴻海精密), whose customers include Nokia Oyj, the biggest cellphone maker, said it may invest as much as US$1 billion to develop a site in Beijing to make wireless and optical communications products.

Benq, which also makes computer displays and scanners, plans to make the phones at its plant in Suzhou, near Shanghai, where it still has room for expansion.

The handset maker, formerly called Acer Communications & Multimedia Inc, forecasts sales will rise 30 percent this year from about NT$70 billion last year.

"If sales grow by that much, profit should top that as we benefit from economies of scale," Liou said.

Benq rose as much as NT$3.50, or 6.4 percent, to NT$58 in early trading.