According to MIC (Market Intelligence Center), an ICT industry research institute based in Taipei, global mobile phone shipment volume reached approximately 285 million units in the fourth quarter of 2006, boosting the full-year volume to 980 million units, up 23% from the previous year. The global industry was stimulated by the peak season and persisting demand in the emerging Chinese and Indian markets. Due to increased outsourced orders from major international brands and BenQ's acquisition of Siemens' mobile phone unit, Taiwanese mobile phone shipment volume scored 56% year-on-year growth and reached 122 million units in 2006, raising its global share to 12.4%, up from 9.8% in 2005.

Despite negative effects of the BenQ-Siemens breakup at the end of September and worse-than-expected performance of second-tier branded makers on fierce competition from major international brands, Taiwanese contract makers benefited from year-end peak demand, enabling Taiwanese mobile phone shipment volume to reach 28.3 million units in the fourth quarter of 2006, inching up 0.2% sequentially. Although the shipment decline of branded makers was offset by the shipment increase of contract makers, fourth-quarter shipment growth of the Taiwanese mobile phone industry is still a far cry from the 16% growth rate of the global industry.

Meanwhile, due to sharp decline in the shipment share of branded products, Taiwanese mobile phone shipment highly concentrated on ODM (Original Design Manufacturing) makers focusing on value-line models in the fourth quarter. As a result, ASP (Average Selling Price) in the fourth quarter fell to US$45, from US$53 in the third quarter, driving down the fourth-quarter shipment value by 13.6% sequentially to US$1.29 billion.

Likewise, shipment share of the three leading ODM makers, Compal Communications, Chi Mei Communication Systems, and Arima Communications, jumped to 93% in the fourth quarter, from 82% in the first quarter. The Taiwanese mobile phone industry has been witnessing increasing concentration, similar to the situation in the global market. This makes it even more difficult for second-tier makers to survive in the Taiwanese industry.

Faced with the intensified industry concentration, second-tier contract makers and branded mobile phone makers lacking economies of scale successively carried out corporate restructuring at the end of 2006 or modified the development direction for their mobile phone business. Following the announcement by its major clients Panasonic and NEC that they would retreat from overseas markets, Quanta, for instance, will gradually switch its contract manufacturing business to the niche market of higher-end PDA (Personal Digital Assistant) phones.

Inventec and BenQ successively implemented corporate restructuring. Inventec separated its own-brand and contract manufacturing businesses, assigning own-brand mobile phone R&D and production to the first business group while actively developing contract manufacturing business for PDA phones and other high-end products. BenQ announced the establishment of a mobile communications business group in January 2007, which will focus on the development of 3G models and smartphones. In addition to switching to mid-range, high-end, and design-oriented products for its own-brand business, Asus also started to ship smartphones to European telecoms in the fourth quarter of 2006.

Owing to the off-season effect and the fact that contract makers will not start mass production of new mainstream models until the second quarter, Taiwanese mobile phone shipment volume is expected to drop 14% sequentially to 24.2 million units in the first quarter of 2007. Second-quarter shipment volume is forecasted to reach 30 million units, thanks to the mass production of Motorola's and Sony Ericsson's new models.

Overall, the Taiwanese mobile phone industry is expected to perform strongly in the latter part of 2007 following a weak start, with sales in the first half still relying on existing models. Growth momentum will begin to gather steam at the end of the second quarter. Taiwanese mobile phone shipment volume is forecasted to reach approximately 120 million units in 2007, maintaining the level of 2006 or suffering a slight decline. As far as product mix is concerned, the Taiwanese mobile phone industry will gradually rid itself of the over-reliance on mid-range and value-line models. Shipment share of mid-range and high-end feature phones will pick up conspicuously. Particularly, models featuring color screen, VGA or even megapixel digital camera modules, and FM radio will increase. Shipment of 3G models is also expected to pick up significantly, boosting the overall shipment value and ASP.

More information can be found in the following MIC report.  The Taiwanese Mobile Phone Industry, 1Q 2007

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