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September 27, 2005 6:16 pm

BenQ to keep Infineon as major supplier

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BenQ, the Taiwanese electronics group that completes its acquisition of Siemens’ mobile unit this week, plans to keep Germany’s Infineon as a long-term supplier of integrated circuits for the company’s handsets.

The commitment by Lee Kun-yao, BenQ chairman, surprised the industry after analysts predicted BenQ might switch to chip suppliers, such as Taiwan-based Mediatek, to cut costs.

Mr Lee told the FT BenQ Mobile, the group’s new handset unit to be formed as of October 1, would keep Infineon as a “major supplier” even after it started producing co-branded mobile phones next year. However, Infineon’s revenues from BenQ Mobile were likely to drop.

“We want to change our mode of co-operation,” Mr Lee said. “In the past, there were many Infineon technologies uniquely developed for Siemens. Now we want to use their standard platform.”

To meet his target of realising at least €250m ($300m) in cost savings and turning round the mobile business next year – both Siemens Mobile and BenQ’s handset operations are lossmaking – Mr Lee said manufacturing outsourced to other companies would be transferred to the group’s factories.

Production for the European market outsourced to Flextronics in Hungary would be shifted to the Siemens plant in Shanghai and BenQ’s plant in Suzhou. Outsourced Siemens production in Latin America would be taken to BenQ in Mexico.

The group’s financial position would also be bolstered by payments from Siemens over the next 12 months.

Mr Lee said most of the €250m Siemens had agreed to pay it for taking over Siemens Mobile would be in cash. A smaller portion amounting to “no more than a few tens of millions” would be provided in IT services over the next nine months, but BenQ had the option to demand a cash equivalent. BenQ was also in talks with European telecoms carriers to restore their confidence in the Siemens handset business.

“Carriers have been losing confidence in Siemens because of the uncertainty over this division – it was not clear whether production and services would be continued,” Mr Lee said.

“It was as if you opened the door of your home and beat your kids in public. That is over now.” He declined to give detailed revenue forecasts but insisted the drop in market share for both Siemens and BenQ phones was about to reverse. “Our book-to-bill ratio is improving,” he said.

On the long-term future of Siemens’ German employees, Mr Lee refused to make firm promises. He said BenQ would keep Siemens’ plant in Kamp Lintfort as its only major base in western Europe but added that once a job guarantee for its nearly 3,000 German employees ended in mid-2006, adjustments might be necessary. 

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