According to Market Intelligence Center (MIC), the Taiwanese mobile phone industry saw growth in shipment volume, soaring 152.3% year-on-year to 32.2 million units in the first quarter, roughly the same level as in the previous quarter. Major growth momentum came from continuing increase in ODM/OEM (Original Design Manufacturing/Original Equipment Manufacturing) orders, whose share jumped to 74% of the total shipment, up from 64% in the previous quarter.

European and US clients, such as Motorola and Sony Ericsson, outsourced more of their production to Taiwanese contract makers than in the fourth quarter of 2005, boosting the shipment share of GSM (Global System for Mobile Communications) products by roughly four percentage points to 34%.

After Panasonic and other Japanese brands announced that they would exit overseas 2G/2.5G (Second Generation/Enhanced Second Generation) mobile phone markets, orders from Japanese clients continued to shrink. Although a number of new 2G/2.5G and 3G (Third Generation) models will enter mass production in 2006, their contribution to the overall shipment volume of the Taiwanese mobile phone industry is expected to be limited. Meanwhile, affected by the off-season effect in South American and European markets and the fact that Taiwanese makers have yet to see substantial results from their domestic sales licenses in China, shipment volume of Taiwanese own-branded business continued to slide in the first quarter.

Although shipment share of Taiwanese GPRS (General Packet Radio Service) products dropped approximately 6.6 percentage points sequentially in the first quarter, models which began mass production in the previous quarter entered their shipment peak period, upgrading specifications of shipped products. Shipment volumes of models with 1.8-inch TFT (Thin Film Transistor) screens and FM radio functions rose in the first quarter, preventing large-scale increase in the shipment share of models priced under US$50, despite shipment growth for the ultra value-line C11x series.

In the first quarter, Taiwanese ODM makers began to ship limited amounts of WCDMA models, reflecting the gradual elevation of model specifications by Taiwanese makers. Benefiting from the shipment of new models, ASP of the Taiwanese mobile phone industry only recorded slight decline of approximately 3% to US$63 in the first quarter. Shipment value shot up 152% year-on-year to about US$2.1 billion in the first quarter, which was about the same level as in the fourth quarter.

Looking ahead to the second quarter of 2006, benefiting from the active development of the value-line mobile phone market by the two major brands Motorola and Sony Ericsson, shipment volume of Taiwanese mobile phones is expected to grow to 38 million units. However, industry concentration will become increasingly evident. As the private-label market dwindles, and Japanese vendors' market share continues to decline, ODM makers failing to receive orders from Motorola or Sony Ericsson will be forced to adjust their strategies or restructure their organizations.