BenQ, the Taiwanese electronics group, is determined to continue making mobile phones although the disappointing takeover of the Siemens handset operations has destroyed a large part of this area of its business.

Mobile devices will remain a very important segment in contract manufacturing and in its branded operations for BenQ, Lee Kuen-yao, chairman, has told the Financial Times.

The remarks follow the company’s surprise announcement last week that it will spin off its brand business under the BenQ name, rename the listed entity and have it refocus on contract manufacturing.

The restructuring, to be implemented in September if shareholders give the green light in June, is widely seen as a desperate attempt to keep afloat what was once Taiwan’s most ambitious branded electronics company.

Mr Lee says the BenQ brand is being restarted and there will now probably be a delay of three to four years in achieving the jump in growth he had hoped to accomplish through the Siemens deal. “We are now taking a step back and facing reality,” he says.

“For the brand, mobile is an arrowhead,” he adds. However, the branded company is aiming for a role as technology and trend leader by offering cutting-edge devices rather than trying to recapture lost global market share through mass sales of commodity phones.

Mr Lee says BenQ is in the final stage of talks about working with European telecoms operators on offering them customised handsets.

Showing off a P21, a Windows Mobile-based smartphone that allows roaming between mobile and wireless LAN networks that is set to launch in the third quarter, he says BenQ will offer to customise handsets for European operators rather than giving them finished products, a business model invented by HTC, a leading smartphone maker.

BenQ is also trying to repair the damage done to its brand image by its decision last September to put its German subsidiary, the former Siemens arm, into insolvency. The move created outrage in Germany but Mr Lee insists the damage was limited to German-speaking markets. The company has built a customer service to serve users of BenQ-Siemens co-branded handsets, which it has stopped making. It expects to have emptied all inventories of these cell phones in the third quarter.

On the contract manufacturing side, the company insists it will build up its handset business again. In the first quarter of this year, the handset segment accounted for no more than 2 per cent of contract manufacturing revenues.

Mr Lee says: “I know that many have told us to sell, or even give away for free, our handset manufacturing operations. But I believe that we have a strong competitive advantage in mobile [contract manufacturing] that lies in the advanced position of our technology.” Overall, the company, which also makes printers, scanners, projectors and flat-screen monitors, can achieve a gross margin of 8-9 per cent in contract manufacturing, he says.

Mr Lee says contract manufacturing orders are returning as a result of the planned separation. However, this turnround is so far limited to non-mobile product segments.

To strengthen contract manufacturing customers’ confidence in a strict separation of the two companies, Mr Lee says he will step down as CEO of both companies after the formal spin-off.