Siemens AG announced yesterday that Taiwan-based BenQ Group will acquire its entire money-losing mobile phone business with more than 6,000 employees worldwide.

According to the agreement, BenQ will acquire all of Siemens' development and manufacturing locations in Manaus, Brazil, and Kamp-Lintfort, Germany, along with administrative functions as well as the sales and marketing organization.

The factory in Shanghai, which is operated as a joint venture with a Chinese partner, will also remain a development and manufacturing location.

Siemens will take a pretax charge of 350 million euros (US$455 million) related to the unit's disposal in the quarter ending in September, according to the company's statement yesterday.

Siemens will also invest in BenQ by purchasing 50 million euros (US$65 million) worth of new shares in BenQ to acquire a 2.5 per cent stake in Taiwan's largest mobile phone producer.

The deal is expected to close in the fourth quarter of Siemens' fiscal year 2005, it said.

"BenQ and Siemens complement one another ideally," said Klaus Kleinfeld, Siemens' chief executive officer. "With this partnership, we have found a sustainable perspective for our mobile phones business."

BenQ guarantees full utilization of the capacity there for three years.

"We also complement one another perfectly in terms of geography," Kleinfeld said. "This will give BenQ, which up until now has been very strong in Asia, access to the European and Latin American markets."

The transaction also includes the rights to the brand and name, which BenQ will be allowed to use for five years, Kleinfeld said.

BenQ Chairman and CEO K.Y. Lee said that the company's expansion strategy will be strongly supported by this deal, as it can now rely on a global organization with excellent employees, a well-established blue-chip customer base in the mobile business and a strong brand with high impact.

BenQ is Taiwan's leading maker of mobile phones and other consumer electronic products such as digital cameras, notebook computers, scanners and LCD screens.

Last month, the mainland central government granted BenQ licences to produce mobile phones.

BenQ's 2004 revenue exceeded US$5 billion. The company shipped 15.5 million phones in 2004, compared with more than 51 million phones shipped by Siemens in its fiscal year through September 2004.

Analysts say they believe that the deal will help BenQ to expand its market coverage in emerging markets such as India, Russia and the Chinese mainland this year.

Analysts believe Siemens is probably following other European manufacturers such as Alcatel and Ericsson to carve out part of its businesses to cut production costs.

They said the deal is likely to accelerate Siemens' retreat from consumer electronics as the company focuses on industrial goods such as turbines, trains and automation equipment.

(China Daily June 8, 2005)