Taiwan handset makers benefit from China OEM orders

China’s domestic handset demand, the world’s largest, not only attracts international heavyweights from around the globe to try their luck in the country, but also helps nurture little-known local handset brand vendors to grow into household names. Through OEM partnerships with South Korean and Taiwanese handset manufacturers, these local brand vendors are now able to compete more efficiently with heavyweights such as Nokia and Motorola.It is estimated that China’s handset market will reach 60 million units this year, of which local brands account for 30 million units. It is also estimated that local handset vendors depend heavily, about 80-90% of their total handset production, on South Korean and Taiwanese handset producers. In other words, for every 10 local-branded handsets, five to six are made by a South Korean handset company, two to three by a Taiwanese maker and only one to two units are made in-house.Taiwanese makers, known for cost down and skilled manufacturing technologies, will continue to benefit from OEM orders from Chinese handset companies.Eastern Communications (Eastcom) is the largest Chinese handset company in Hangzhou, Zhejiang Province. The company, founded in 1958, was formerly the telecommunications equipment maker operated by the China National Philatelic Corporation (CNPC). It formed a joint venture agreement with Motorola in 1991 and began trading publicly in 1996. The handset company established a research lab in the US in 1997. By 1999, it launched the first locally-designed GSM handset in China, the EC528.Eastcom sold 2.1 million GSM handsets at home in 2002 and is expected to sell 4.3 million handsets (including 1.3 million CDMA handsets) this year. It ranks among the top three Chinese handset brands, trailing only Ningbo Bird and TCL.Although China joined the World Trade Organization (WTO) in 2002, the local handset market is still very restricted and protected. Taiwanese handset companies, lacking domestic selling licenses, usually opt for OEM deals with Chinese companies. Local vendors, on the other hand, prefer outsourcing their productions to South Korean and Taiwanese makers in order to quickly gain market shares and launch more products in a shorter time.The business model proves to be a win-win practice, in which Taiwanese handset makers can establish handset development and manufacturing capabilities and reach economies of scale, while Chinese vendors can focus on marketing, distribution and branding.Source: DigiTimes