Taiwanese Handset Shipment Hits New High

MIC: Driven by demand for new models in emerging markets and the holiday effect in Europe and the U.S., global handset shipment volume in the fourth quarter of 2005 was estimated at 220 million units, with whole-year shipment volume reaching 772 million units. In the fourth quarter, China, India, the Middle East, and Africa recorded strong demand for new models, among which, China and India saw an addition of 15 million and 7.6 million subscribers respectively. Although Latin America and Eastern Europe saw slow growth in demand for new handsets, Brazil and Russia added 6.2 million and 12 million subscribers, respectively.

Due to strong demand in the aforementioned emerging markets and high reception of UMTS (Universal Mobile Telecommunications Service) and super-thin models in the replacement market in Europe, shipment volume of Nokia and Motorola both grew 20% sequentially in the fourth quarter. Benefiting from the brisk sales of the Walkman series handsets, Sony Ericsson chalked up shipment volume of 16.1 million units in the fourth quarter, up 16% sequentially. Affected by slackened demand in the North American and Korean markets, Samsung and LG recorded modest sequential growth rates of 1% and 5%, respectively. Demand came mainly from the brisk sales of UMTS and super-thin models in Western Europe.

Due to the merger effect between BenQ and Siemens and continuing growth in mid-range and value-line orders placed with Taiwanese makers by Motorola and Sony Ericsson, shipment volume of the Taiwanese handset industry hit a record high with 32 million units in the fourth quarter of 2005, up 109% year-on-year. The Taiwanese mobile phone industry's share of global supply exceeded the 10% mark, to 15%.

Due to the shift to higher-end models following the merger between BenQ and Siemens, ASP (Average Selling Price) rose to US$65 in the fourth quarter, up from US$47 in the third quarter. Although orders for monochrome value-line models from Motorola continued to grow, a number of new high-end models entered mass production in the fourth quarter. Shipment of smartphones by HTC and CMCS also grew; therefore, ASP of Taiwanese makers, excluding Siemens phones, inched up to US$50. Owing to growth in ASP and shipment volume, shipment value of the Taiwanese handset industry hit US$2 billion in the fourth quarter, up 103% year-on-year and 161% sequentially.

European and U.S. brand vendors were still the major clients of Taiwanese contract makers. Motorola and Sony Ericsson together absorbed nearly 70% of Taiwan's shipment volume. Although most orders placed by international vendors with Taiwanese makers are for value-line models, product specifications has been progressing to a higher level and shipment share of GPRS (General Packet Radio Service) models reached 70% in the fourth quarter.

In late 2005 and early 2006, a number of new models entering mass production have been furnished with a 30 million-pixel camera, FM radio, or TFT (Thin Film Transistor) panel. With Panasonic withdrawing from the 2G and 2.5G markets, the only Japanese clients left for Taiwanese makers will be NEC and Toshiba. Therefore, business sources for Taiwanese handset makers will be even more concentrated. Faced with the rigid policies in China, Taiwanese makers have shifted their private-label businesses to channel players in the emerging markets of Southeaste Asia or Russia. Overall private label shipment, however, will be shrinking, further widening the gap between first-tier ODMs (Original Design Manufacturer) and second-tier makers.

In the fourth quarter, BenQ was still adjusting following its acquisition of Siemens' handset business and thus was unable to mass produce new models. After taking over Siemens' handset channels, BenQ and Siemens both managed to maintain their shipment performance, while boosting the share of OBM (Original Brand Manufacturing) businesses amid Taiwanese handset industry to 35%. However, shipment volumes of Taiwanese brands, including BenQ Mobile, IAC and Asus, remained flat sequentially in the fourth quarter, mainly due to the rollout of mid-range and value-line models by Samsung and LG in the Taiwanese market.

In 2006, driven by both contract production and brand businesses, shipment volume of Taiwanese handsets is expected to hit 154 million units. In the face of shrinking profits and rising demand in emerging markets, orders for mid-range and value-line models placed by Motorola and Sony Ericsson with Taiwanese makers is likely to exceed one million units. As both companies will adopt dual sourcing strategies, price competition will curb growth in shipment value.

In 2006, BenQ Mobile will launch new models bearing the BenQ-Siemens brand, which will test the extent of their integration and market reception. Owing to the smooth mass production of various new models by Sony Ericsson, shipment volume of the Taiwanese handset industry is anticipated to hit new high with a record of 37 million units in the first quarter of 2006, up 16% sequentially. Taiwanese Handset Shipment

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