According to MIC (Market Intelligence Center), an ICT industry research institute based in Taipei, the Taiwanese mobile phone industry is expected to reach a shipment volume of 29.96 million units in the fourth quarter of 2006, up 6.2% sequentially. Shipment value is expected to drop slightly on the adoption of entry-level chips by ODM (Original Design Manufacturer) makers. Total shipment volume for the full-year 2006 is expected to amount to 123 million units. Due to shipments of new Motorola W-series models and increasing orders from major brands to meet year-end peak-season demand, growth of ODM shipments are expected to offset the declining shipments of own-branded products in the Taiwanese industry in the fourth quarter.

Currently, Taiwanese ODM makers dominate value-line product orders from Motorola and Sony Ericsson. However, Motorola's Motofone, which uses ultra low price chips and is designed by Motorola itself, will be given to EMS (Electronics Manufacturing Service) providers for production and shipment, beginning in the fourth quarter. Changes in major brands' outsourcing strategies for value-line products and competition from EMS providers might affect shipment growth of Taiwanese ODM makers in 2007.

Unable to receive orders from first-tier brands, second-tier ODM makers will have even more difficulty surviving the competition in 2007, prompting them to shift their resources to PDA (Personal Digital Assistant) and Smartphone R&D and to telecom carriers' private-label market. Therefore, in 2007 the Taiwanese mobile phone industry's performance will depend on whether major brands will expand outsourcing of mid-range and high-end feature phones or Smartphones following the shift of their resources to 3G products, and whether Taiwanese makers will have opportunities to expand their cooperation with international brands, as there is an increasing demand for customized models by mobile operators in the 3G era.

Worldwide mobile phone shipment volume reached 245 million units in the third quarter of 2006, with year-on-year growth reaching 22%, compared with 27% a year earlier. With major international vendors pushing ultra-thin and music models and resorting to price cuts to stimulate consumer demand, replacement demand in the mature markets of North America and Western Europe picked up slightly. Emerging markets continued to rack up significant growth, with India scoring the most remarkable performance. Driven by gradual completion of network installation in second- and third-tier cities, and by value-line models and rate cuts, India added 17.4 million subscribers in the third quarter of 2006, superseding China to become the largest market for new phone demand worldwide.

In contrast to the robust growth of India and China, Brazil saw the number of new subscribers drop from a year earlier, as its penetration rate has already exceeded 50%. Mobile phone shipment in Russia was affected by the fact that penetration rate reached 100% in August. Also, mobile phone prices rose due to the government's crackdown on black-market sales. Overall, although global mobile phone shipment volume continued to grow in the third quarter, growth momentum was weaker than a year earlier, indicating a slowdown in the global mobile phone market.

In contrast to global market growth, Taiwanese mobile phone shipment volume, despite 69% year-on-year growth, dropped 14% sequentially to 28.22 million units in the third quarter. The decline is attributed mainly to the fact that major brands' performance did not meet original expectations and to a shipment decline of ODM makers due to a transition between new and old models. As shipment of the Taiwanese mobile phone industry focused on value-line models in the third quarter, ASP (Average Selling Price) fell by 8.6%, to US$53. Due to reduction in shipment volume and decline of ASP, overall shipment value slipped 21% sequentially to US$1.49 billion in the third quarter.

More information can be found in the following MIC report.  The Taiwanese Mobile Phone Industry, 4Q 2006

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