Taiwanese manufacturers feeling the pressure

Taiwan’s handset manufacturing industry was driven predominantly by the orders of foreign companies in Q2 2005, according to figures published by the Taipei-based Market Intelligence Centre (MIC). MIC found that orders from Sony Ericsson and Motorola, primarily for low-cost handsets, were the main sources of the 13 percent growth experienced in the period. Second-tier ODMs, which have traditionally had strong exports to China, experienced a fall in shipments in Q2. Taiwan’s domestic brands, such as Asus and BenQ, also saw their unit shipments contract on a sequential basis in Q2.

With the swing towards using Taiwan as a low-cost manufacturing base, average selling prices fell to USD 54 for the quarter.

Two years ago industry analysts were predicting strong growth for Taiwanese ODMs and the emergence of one or two global brands to compete on the world stage. The reality has been somewhat different.

With the increased focus on design and branding from market leading firms such as Motorola and Nokia, Taiwanese vendors have found themselves unable to keep up with the latest trends. As such, they have been relegated to providing low-cost handsets for both their own brands and as a white label service for global handset manufacturers.

Taiwanese manufacturer BenQ will be hoping its recent acquisition of Siemens’ Mobile business will help it to buck this trend, providing access to distribution channels in Europe and an extensive product marketing infrastructure.

Foreign companies are switching their focus to mainland China, where cut-throat competition between local companies is driving costs even lower. Taiwan’s exports to its neighbour are also falling.

Even well-established partners such as HTC, which is best known for providing many of the Windows Mobile-based devices branded by operators in developed markets, are starting to feel the pressure. MIC recorded a fall in smartphone shipments from Taiwan during Q2 2005.

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