May. 14, 2001

Taiwan's government-backed Institute for Information Industries (III) had just adjusted its forecast for Taiwan mobile phone shipments in 2001 from the original 34 million units down to 18 million units for less than a 5% share of the global market, when new signals from the market seem to make these predictions obsolete again.

Because, as mobile phone f.o.b. prices continue to fall, mobile phone vendors are increasing their outsourcing to OEMs and ODMs flexible enough to cope with this situation.

The average f.o.b. prices for low-end mobile phones is at present US$ 50-60 and is forecast to soon drop to about US$ 40. - Motorola and Ericsson have awarded Taiwan manufacturers with orders and local insiders rumor that Nokia will soon follow suit. Therefore, predictions are now that Taiwan's mobile shipments should see a sharp increase in the near future, but with profit margins down.

In principle, Taiwan has three broad types of mobile phone manufacturers: companies that specialize in mobile phone production, and then notebook computer makers and PDA manufacturers. Although ODM orders for international vendors still dominate Taiwan's mobile phone industry, it also shows that products made in Taiwan are just as good as the one made by the international giants themselves. Consequently, manufacturers on the island hope to move away from their current role and produce own-brand mobile phones. However, to try to break into the traditional market is probably unrealistic, since the penetration rate of mobile phones is already high and the major players with the big brand names already control the market.

Hopeful: Smartphones!

The development of smart phones is still in its infancy, and the international giants are still testing the market. Taiwan manufacturers should have more success developing their own brands by focusing on smart phones.

Rom 2001 to 2004, global smart phone shipments will rise at a compounded annual growth rate of over 160% to 23 million units, according to estimates of the Gartner Group.

A few Taiwan companies have made inroads in the smart phone industry, i.e. Acer Communications & Multimedia unveiled the Pro8, the first smart phone with a Taiwan brand name. Another type, i3698, was launched by Inventec last November, and the company has announced plans to introduce a second model, the iP88, in May this year. The new product would be the first Taiwan-made smart phone to support the Java platform.