Benq Corp., which earlier this month agreed to take over Siemens AG's unprofitable handset unit, will reduce the number of new mobile-phone models and market products under a single brand globally to squeeze costs.
Benq had planned to release 20 handset models this year while Siemens was scheduled
to introduce 25, the combined total of which can be trimmed to about 35 after the
divisions are joined, said K.Y. Lee, Benq's chairman and chief executive officer. The
products will be sold under a ``Benq- Siemens'' brand, he said.
``By product segment, the Benq side is more on the middle and high-end models, and
Siemens is on the volume kind of models,'' said Lee, 52, in an interview in Taipei.
``We can definitely change the product-launching process in a faster way and with
high- end models.''
Benq has set a goal of making the Siemens unit break even by next year, stemming
losses that may total 400 million euros ($484 million) in the 12 months to Sept. 30.
Achieving a target of saving as much as $1 billion a year from the combination and
quickening the release of new products may be hindered by difficulties integrating
teams mostly based in Germany and Taiwan, said Taipei-based investor Simon Chao.
Steps to combine the mobile-phone division, to be based in Germany after the formal
handover on Oct. 1, are proceeding well, with few Siemens staff so far resigning, Lee
``They are very happy to stay with the new organization, because (the mobile phone
unit) was just a peanut inside Siemens,'' Lee said. ``But when they come to Benq,
they become the most important organization inside Benq.''
The combination will raise the division's share of Benq's total sales to about 60
percent from about 11 percent now, Lee said. Benq's other devices include scanners
and personal digital assistants, or PDAs.
Handset branding will be the same worldwide, with Benq holding the rights to
Benq-Siemens for five years. The companies are discussing how to combine marketing,
including whether Benq should share in advertising costs such as for Spain's Real
Madrid soccer team, which dons shirts with the Siemens name.
Worldwide mobile-phone sales are expected to rise 10 percent to 740.4 million units
this year, Credit Suisse First Boston said in a note to clients on April 14, compared
with its previous projection of a 6 percent gain. The investment bank predicts that
mobile users will total more than 3 billion globally by 2010, from less than 2
Benq has said it can shave procurement and production costs by as much as $500
million and gain ``revenue synergies'' of a similar amount by 2006, as it combines
production and sales channels.
The company has started talks with Infineon Technologies AG, Europe's biggest
semiconductor maker and a supplier of chips to Benq. ``We don't intend to change that
(relationship) overnight,'' Lee said.
Benq also supplies handsets to rivals including Nokia Oyj, the world's biggest
mobile-phone maker. So far, Benq has received no indication customers want to review
For now, Benq's expansion plans will target countries including China, India, Brazil
and Turkey, with the U.S. only a ``secondary market,'' Lee said.
Benq is still in talks about how to incorporate Siemens's manufacturing venture in
China, the Shanghai SVA Group, which makes network equipment as well as handsets.
China will become a more important production site for Benq, accounting for 50
percent to 60 percent of its total handset output in about five years' time, up from
about 40 percent now. Germany will retain some manufacturing jobs although
service-related work will increase, Lee said.
Benq shipped 15.5 million phones in 2004, compared with more than 51 million phones
made by Siemens in its fiscal year through September 2004.
The Taiwanese company, which also makes MP3 players and laptops, raised its forecast
for handset shipments this year to more than 15 million units from a previous
estimate of 10 million, chief financial officer Eric Yu said on June 7.