Electronic giant Philips will stop producing mobile phones independently and transfer part of its manufacturing capacity to the China Electronic Corp (CEC), the two companies jointly announced in Beijing Wednesday.
"Philips will cease to be an independent manufacturer of mobile handsets and will bring part of its research and development and part of its manufacturing activities into a partnership with CEC, while maintaining a focused sales and marketing activity under the Philips brand,'' Philips said in a statement.
The company currently manufactures mobile handsets in a Shenzhen-based joint venture in which CEC holds a minority stake through its subsidiary SED.
CEC will increase its shares in the joint venture to take a controlling stake and will acquire some additional manufacturing equipment from Philips.
CEC will also acquire part of Philips research and development resources and designs for mobile phones.
The Chinese company will soon become the manufacturer for Philips mobile phones.
The move by Philips follows another telecom giant Ericsson's outsourcing of its mobile handset manufacturing earlier this year.
The Philips mobile phone branch has been loosing money globally in recent years. However it made money in China and recorded a growth rate of 100 percent in the first quarter of this year compared with the same period of 2000.
"Philips controls 4 percent of China's mobile handset market and ranks No 6 here,'' said Rob Westerhof, chief executive officer (CEO) of Philips East Asia.
By transferring the manufacturing capacity from France to China, Philips could save costs and be more closer to its major customers, he said.
"Although Philips will stop independently producing handsets, we are the key component provider for the mobile phone makers," said Westerhof, "They will be `Philips on the inside.'"
This restructuring will cost the group 300 million euros (US$259 million), said the official.
The deal is good news for CEC, one of the country's major handset makers, as it means the company could get Philips technology at a reasonable price.
The company also produces handsets for Japan's NEC. It is also the major shareholder for Xiamen-based Amoisonic mobile phones.
Its own brand mobile phone, CEC, has received government approval and will be launched in latter half of this year, according to Lu Jidong, general manager of International Cooperation at CEC.
As China moves closer to the top of the mobile phone market and domestic handset makers become more mature, Chinese companies will play a more vital role in the industry.
(China Daily 06/28/2001)
