Research Reports
Compal Communications' Mobile Phone ODM Business
January 02, 2006 / Eddie Tsai
19 Page, Topical Report
US$1,370 (Single User License)

Abstract

With global demand for handsets starting to slow, in the future emerging markets will constitute the main source of first-purchase demand. A holistic approach to global marketing therefore now occupies an important place within the market development strategies of the leading international handset vendors. At the same time, under heavy pressure to secure market position and cut production costs, the leading vendors have begun to outsource a larger share of their handset production and leverage the global logistics capabilities of handset assembly providers. In light of the growing role of both ODMs and EMS providers in the global mobile phone value chain, this report will examine the capabilities built up by Compal Communications, the Taiwanese mobile phone industry's largest ODM.
  •  List of Topics
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Compal Communications' main business area is the ODM production of GSM and GPRS handsets. In 2005, Motorola secured two large contracts from the GSM Association to supply entry-level handsets for emerging markets. With Compal Communications increasing its production capacity through the establishing of its Nanjing Plant - which began volume production in 2004 - these contracts have enabled this company to achieve rapid revenue growth, becoming the leading ODM handset maker in Taiwan.

For more effective utilization of resources, Compal Electronics - Compal Communications' parent company - decided that PMCC, Compal Electronics' handset division, would be merged into Compal Communications in January 2006. This merger will strengthen Compal Communications' capabilities in the areas of CDMA (Code Division Multiple Access) handset and PDA technology. It is anticipated that the merger will create significant synergy in terms of both product technology and customer portfolios. It will have a positive impact on Compal Communications' long-term business development, for example by creating the potential for expanding Compal Communications' collaboration with Motorola to include CDMA handsets.

Figure 10

Compal Communications - PMCC Merger and Major Customers by System Technology

Source: MIC, January 2006

In its collaboration with Motorola, Compal Communications has developed a global logistics model designed to meet the customers' needs through the establishment of a division of labor between Taiwan and China. With Taiwan's facilities aiming at R&D and China's fabs focusing on production, Compal Communications has been able to support Motorola's development of emerging markets, shipping handsets to Latin America, Eastern Europe, India, and various parts of Asia. In other words, the capabilities of Compal Communications' Nanjing Plant in boosting production capacity, keeping production costs down, and ensuring on-time delivery will be crucial to strengthen the partnership between Compal Communications and Motorola.

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