Weak Forecast for Taiwan

A key factor for the development of the Taiwanese smart cellular device industry in the first half of 2009 will be whether and when the economic downturn reaches its lowest point. If the economic recovery is below expectations, consumers will continue to delay their replacement purchases, which will also affect smart cellular device sales.

According to statistics compiled by Taipei-based MIC - Taiwanese smart cellular device shipment volume (including Smartphones and PDA phones) reached 9.61 million units in the fourth quarter of 2008, up 46.4% year-on-year, but down 12.8% sequentially. The industry was affected by the global economic downturn and the reduction of Apple iPhone 3G production after the shipment peak in the third quarter.

ASP of the Taiwanese smart cellular device industry managed to remain stable in the fourth quarter due to the shipment increases of several high-end models. However, Mr. Lin stated that "smart cellular devices have become key products in 2009 for mobile phone brands, operators, and even computer brands. With international brands investing in this field, there will be downward pressure on manufacturers' hardware assembly costs and shipment prices. Furthermore, OS (Operating System) companies are reducing licensing fees or adopting open-source strategies, also cutting down costs for smart cellular devices. Due to these factors, ASP will likely decline in the future."

In the first and second quarter of 2009 the Taiwanese smart cellular device industry's shipment volume is expected to be affected by the economic downturn and the traditional off-season. Since December 2008, manufacturers have been attempting to cut production and clear inventories. Furthermore, international brands are expecting the economy to rebound in the second half of 2009. As a result, they have delayed shipment schedules, and few new models are expected to be rolled out at the beginning of the year. Shipment in the first quarter will mainly consist of the Apple iPhone 3G, the HTC Diamond series and the T-Mobile G1. However, as these products have already passed their lifecycle peak, the Taiwanese industry's shipment volume is expected to fall 20%-25% sequentially in the first quarter. Shipment volume year-on-year growth rates are expected to reach 18.9% and 3.6% respectively in the first and second quarter of 2009.

According to MIC Industry Analyst Edward Lin, "only HTC managed a significant growth performance in the industry in the fourth quarter of 2008. Shipment of the company's Diamond series increased. Furthermore, the G1 phone featuring Android, which was produced for T-Mobile, hit the market in the United States and the United Kingdom. The company also launched the high-end Touch HD, the mid-range Touch 3G and the value-line Touch Viva."

The Taiwanese smart cellular device industry's ASP (Average Selling Price) and shipment value in the fourth quarter benefited from the fact that HTC's share of total shipment increased, as HTC focuses on the development of mid-range and high-end products. ASP remained stable at US$307. The Taiwanese smart cellular device industry's shipment value was somewhat affected by the decline in shipment volume and reached US$2.95 billion in the fourth quarter of 2008, up 53.4% year-on-year but down 13.3% sequentially.

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