Struggling Motorola drags down Taiwanese suppliers

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Struggling Motorola drags down Taiwanese suppliers

Mobile giant's setback spreads to local firms.

Lacklustre performance at Motorola is hitting the company's main suppliers in Taiwan, according to analyst reports. 

Motorola's handset shipments were down more than 30 percent in the traditionally slow first quarter, falling to 45.4 million.

The company's global market share plunged from 23.3 percent in the fourth quarter of 2006 to just 17.5 percent in the first quarter of 2007, indicating that the slump could be more than a seasonal decline.

Motorola reported a net loss of US$181m in the first quarter. Forecast profit or loss figures for Taiwanese handset makers are not yet available.

Compal Communications, one of Taiwan's largest mobile phone makers, could be especially badly affected, predict analysts from KGI Securities in Taipei.

The company devotes 90 percent of its mobile handset production capacity to making phones for Motorola. 

Compal's sales fell 17 percent in the first quarter, and the company is expected to report sales growth below 10 percent in the second quarter and, in the worst case, no growth at all, according to KGI.

Metal and plastic case manufacturer Chi-Cheng is expected to report similarly poor results, as Motorola begins the gradual phasing out of its Razr and Silvr phones, according to Primasia Securities in Taipei. 

Several other Taiwanese handset and component makers are also being affected, but are likely to fare better because they have a more balanced exposure to the market. They also act as suppliers to other international brands including Nokia.

Motorola plans to drop several handsets and bring new high-end models onto the market. This decision is likely to affect Taiwanese phone and component makers later this year, analysts believe.
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