July 6, 2006

According to the Market Intelligence Center (MIC) the Taiwan mobile phone industry saw growth in shipment volume, soaring 152.3% year-on-year to 32.2 million units in the first quarter, roughly the same level as in the previous quarter. Major growth momentum came from continuing increase in ODM/OEM orders, whose share jumped to 74% of the total shipment, up from 64% in the previous quarter.

European and US clients, such as Motorola and Sony Ericsson, oursourced more of their production to Taiwan contract makers than in the fourth quarter of 2005, boosting the shipment share of GSM products by roughly four percentage points to 34%.

After Panasonic and other Japanese brands announced that they would exit overseas 2G / 2.5G ( Second Generation/Enhanced Second Generation ) mobile phone markets, orders from Japanese clients continued to shrink. Although a number of new 2G / 2.5G and 3G ( Third Generation ) models will enter mass production in 2006, their contribution to the overall shipment volume of the Taiwan mobile phone industry is expected to be limited. Meanwhile, affected by the off-season effect in South American and European markets and te fact that Taiwan makers have yet to see substantial results from their domestic sales licenses in China, shipment volume of Taiwan own-branded business continued to slide in the first quarter.

Although shipment sare of Taiwan GPRS products dropped approximately 6.6 percentage points sequentially in the first quarter, models which began mass production in the previous quarter entered their shipment peak period, upgrading specifications of shipped products. Shipment volumes of models with 1.8-inch TFT screens and FM radio functions rose in the first quarter, preventing large-scale increase in the shipment growth for the ultra valueline C11x series.

In the first quarter,, Taiwan ODM makers began to ship limited amounts ofWCDMA models, reflecting the gradual elevation of model specifications by Taiwan makers. Benefiting from the shipment of new models, ASP of the Taiwan mobile phone industry only recorded slight decline of approximately % to US$ 63 in the first quarter. Shipment value shot up 152% year-on-year to about US$2.1 billion in the first quarter, which was about the same level as in the fourth.

Looking ahead to the performance of the second quarter of 2006, benefiting from the active development of the value-line mobile phone market by the two major brands Motorola and Sony Ericsson, shipment volume of Taiwan mobile phones is expected to grown to 38 million units. However, industry concentration will become increasingly evident. As the private-label market dwindles, and Japanese vendors' market share continues to decline, ODM makers failing to receive orders from Motorola or Sony Ericsson will be forced to adjust their strategies or restructure their organizations.