Mon, Jan 09, 2006 page10

• Cellphone makers shift focus to high-end models

  STIFF COMPETITION Phone makers are trying to stay profitable with high-end phones, but a price war looms between Compal and Foxconn

  • CNA
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  An industry shakeup resulting from aggressive pricing over the past year has driven many Taiwanese cellphone makers to develop high-end devices to maintain their profitability.

  Although Taiwanese companies still need to get more new clients, industry experts said that they are optimistic about a bigger role for the domestic industry in the global market, citing Taiwan manufacturers' strong design abilities and efficient production.

  According to forecasts by the Market Intelligence Center (MIC) under the semi-official Institute for Information Industry, Taiwan is expected to have put out 68.28 million mobile phones last year, up by 30.6 percent compared to the 2004 level.

  Meanwhile, the share enjoyed by Taiwanese companies in the world market is estimated to have grown to 10.9 percent for last year from 8.3 percent in 2004, MIC predicted.

  Taiwan produced 52.3 million cellphones in 2004, up from 42.9 million units in 2003, MIC statistics showed.

  new customers needed

  But Taiwanese companies have to court more new clients by perfecting their original design manufacturing, if they want to expand their business significantly around the world, a Merrill Lynch researcher suggested.

  Apart from top players like Nokia and Motorola, second-tier foreign brands, such as Alcatel and Panasonic, have been slow to deliver orders to Taiwanese contractors, the Merrill Lynch expert said, noting that it is the prime reason why Taiwan has not gained full momentum to increase its international market share over the past five years.

  Nevertheless, Taiwanese companies still have a good chance of grabbing a bigger share thanks to an emerging Asian market and the nation's geographic location, he said.

  Compal Communications Inc (華寶通訊) was Taiwan's No. 1 mobile phone manufacturer last year, producing 15 million units in the first half of the year.

  Compal Chairman Chen Juey-tsung (陳瑞聰) expressed his belief that his company's output volume will further pick up this year with orders coming from new clients and Motorola, which has been one of Compal's long-term customers with a focus on low-priced models.

  But Compal is soon to encounter a challenge from Foxconn International Holdings Ltd (富士康控股) -- a spin-off company of Hon Hai Precision Industry Co (鴻海精密), which has acquired Chi Mei Communication System (奇美通訊) with orders from Motorola, the Merrill Lynch expert said.

  A price war between Compal and Foxconn is set to rage, the Merrill Lynch analyst pointed out, describing its as a typical story of Asian industries that engage in price cuts to survive.

  According to a Merrill Lynch report, India and Russia, rather than China, were the fastest growing markets for worldwide handset producers in 2004.

  The report also pointed out that many Taiwanese companies, which have relocated to China in search of cheaper labor and real estate to maintain their profitability, have hit a wall in the volatile Chinese market.

  It said that declining demand and fierce competition from South Korean rivals have made the situation even harder for Taiwanese firms in China.

  Since the Chinese market is full of uncertainties and risks, Taiwan cellphone makers are seeking to develop gadgets that can yield handsome profits, industry observers said.

  smart phone maker

  High Tech Computer Inc (宏達電子) -- the world's largest original equipment manufacturer of hand held devices -- is a good example, they said, noting that its success in producing smart phones and PDA phones has yielded lucrative earnings for the company, luring contract cellphone makers to consider setting up partnerships with businesses in other sectors.

  The growing demand for third-generation cellphones and smart phones may give a new lease on life to Taiwanese manufacturers that went through mergers, acquisitions or a pull back from the market last year, they said.

  For your information

  Cellphone sales

  * Taiwan produced 68.28 million mobile phones last year, up 30.6 percent from 2004. * Taiwanese firms' global market share grew to 10.9 percent last year from 8.3 percent in 2004. * Compal Communications Inc was the nation's No. 1 mobile phone manufacturer last year, producing 15 million units in the first half of the year. Source: Market Intelligence Center
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