Royal Philips Electronics of the Netherlands and Taiwan's BenQ Corp (
Philips will control 51 percent of the new company, Philips BenQ Digital Storage, while BenQ will hold the remaining 49 percent.
The new company, which will open next month, is expected to develop optical storage devices such as CD-ROM and DVD-ROM drives for desktop and laptop computers.
The partnership aims to exploit the strengths of each company.
"Philips leads in technology and innovation in research, whereas BenQ is strong in manufacturing, product development and marketing," BenQ vice president William Wang (王威) told the Taipei Times yesterday. "This joint venture is very complementary and beneficial to both partners."
Philips Taiwan's Joseph Chuang (莊鈞源) will head the new company.
"This is the first example of Philips cooperating with local companies," Chuang said yesterday.
The move is part of the Dutch giant's departure from manufacturing, which is no longer commercially viable in Europe.
By outsourcing production to Asia, Philips can make the most of its strengths in research and exploit Asian expertise in low-cost manufacturing, Chuang said.
BenQ and Philips have been working together for over 10 years -- an important factor in Philips' choice of BenQ as a Taiwan partner to co-develop storage devices.
The joint venture is one of a growing number of partnerships between Taiwanese manufacturers and international high-tech companies. The new company will have its own marketing and sales teams and BenQ will be in charge of manufacturing.
"Philips wants to outsource all of its manufacturing to Taiwan and China and keep its research at its headquarters in the Netherlands," said Benny Lo (盧志恆), an analyst at Primasia Securities in Taipei.
In addition to BenQ's expertise in manufacturing and marketing, the company's position in the China market may also have contributed to the decision, Lo said.
BenQ is one of the leading makers of PC peripheral products -- including storage devices -- in China. Philips may be seeking access to BenQ's distribution channels in China through this joint venture.
BenQ is also one of the largest manufacturers of optical storage drives in Taiwan, Lo said.
Last year the company exported 15 million storage drives and hopes the new company will double that number.
"This is very good for BenQ," Lo said.
One area of concern for analysts is BenQ's cellphone business, which makes up 40 percent to 50 percent of the company's income, making the company the largest supplier of handsets in Taiwan.
Anticipated orders from industry leader Nokia Oyj have been slow to materialize. Officials from Nokia visited BenQ last September, but BenQ has not increased its orders of handsets components, suggesting no new orders, Lo said.
An increase in the sales of storage products from the new Philips-BenQ joint venture should help to offset any weakness in the handset market this year.
Another area of concern is BenQ's relationship with its existing customers.
"Pioneer Corp is one of BenQ's largest customers for DVD-ROM drives," said Hiko Lin (林彥成), an optical drive industry analyst at the government-funded Market Intelligence Center. "Pioneer may find another supplier and terminate its relationship with BenQ as a result of this partnership with Philips."
Last year Taiwan produced 79.4 million optical storage drives, worth US$3 billion, Lin said. This year Lin forecasts the figure will grow to 81 million units, but due to falling prices, they will be worth US$2.7 billion.
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