Motorola's Tumbling Sales Hurt Its Contract Suppliers in Taiwan

Taipei, April 28, 2008 (CENS)--Motorola's recent tumbling share of the global market have made its Taiwanese contract suppliers, including Compal Communications Inc. and Chi Cheng Enterprise Co., Ltd., not likely to turn profitable this year, according to industry sources.

According to an analytic report released by the Market Intelligence Center (MIC) under the government-funded Institute for Information Industry, Taiwan's handset production volume is estimated at 20.74 million units in the second quarter of this year, slightly up 6.1% from a quarter earlier and 8.7% from a year earlier. The production volume is projected to reach 25.06 million units in the third quarter, growing 20% from the second quarter.

Also, MIC noted that Taiwan's annual shipment of feature phones this year may reach the same level of 91.5 million units as posted last year. In other words, lackluster operation performance is still lingering in Taiwan's handset industry.

In the first quarter of this year, Motorola shipped only 27.4 million mobile phones, sharply down 40% from 45.4 million units posted a year earlier. This has heavily undermined the business operations of its Taiwanese contract suppliers, including Compal Communications, Chi Cheng, Largan Precision Co., Foxconn Technology Group, Silitech Technology Corp., Merry Electronics Co. and Unimicron Technology Corp, especially Compal Communications and Chi Cheng, which both have over half of their total revenues come from sales to Motorola.

Compal Communications posted net profits of only NT$0.68 per share in the first quarter, far lower than NT$2.4 of a year earlier. Furthermore, based on its sales revenue of NT$9.518 billion and shipment of 10.7 million mobile phones, the company's ASP (average selling price) sharply dropped to less than US$30 in the quarter.

In the past, Compal Communications used to see its sales to Motorola continuously hit record highs for six quarters in a row, prompting it to excessively expand its capacity. However, with Motorola stumbling in the global market, the company, though already securing new ODM (original design manufacturing) orders from Nokia and LG and other for high-end PDA phones, is still suffering quite low capacity utilization rate. Noteworthy is that the orders for PDA phones are expected to significantly boost the company's profits in the second half of this year when it starts delivery of the products.

World's Top 5 Handset Brands in Terms of Global Market Share for Q1, 2007
Brand	Shipment	Annual Growth	Global Market Share
Nokia	115.5 M.	26.8%	39.6%
Samsung	46.3 M.	33%	15.9%
Motorola	27.4 M.	-39.7%	9.4%
LG	24.4 M.	54.4%	8.4%
Sony Ericsson	22.3 M.	20.8%	7.6%
World’s Total	291.6 M.	14.3%

Source: International Data Corp.