Presence, history and expected future development of BenQ

Table of Content

1. Introduction

1.1 Presentation of the problem

1.2 Structure of the thesis

2. BENQ

2.1 Company Presentation

2.1.1 Products and Services

2.2 Company history

2.2.1 Past

2.2.2 Present

2.2.3 Future

2.3 Potential investors

2.3.1 Beha

2.3.2 Sentex SENSing

2.3.3 Bacoc

3. Siemens

3.1 Company presentation

3.1.1 Products & Services

3.2 History

3.2.1 Past

3.2.3 Future

4. Market Entry

4.1 Strategy

4.1.1 Acquisitions

4.1.2 Acquisition BenQ Siemens

4.2 Reasons

4.2.1 Management

4.2.2 Reputation

4.2.3 Access in detail

4.2.4 R&D, production facilities

4.3 Sum up

5. Conclusion

Bibliography
Contributions from newspapers, journals:
Contributions from the Internet:

1. Introduction

1.1 Presentation of the problem

The mobile phone market has increased significantly worldwide over the last years. Mobile communication is becoming more relevant due to the rising importance of all time mobility, flexibility, reachability and information. There is a future tendency for the exclusive use of mobile phones. The mobile phone is a status symbol and it is easier and cheaper to communicate through them than through telephone mainlines in terms of mainline implementation costs. Implementation costs for mainlines are considerably higher. Mobile phones offer many additional functions such as text messaging, phone book, contacts, remember functions, Internet access, bluetooth, TV and much more. In 2006 the worldwide sales of mobile phones increased by 25% compared to 2005. Approximately 1 billion mobile phones had been sold. The main reason is emerging markets with much lower teledensity and the replacement of older mobile phones with new ones. In 2006 Nokia had been the worldwide market leader with 34,1% (2005:~33%) of the market shares followed by Motorola (21,3%), Samsung (11,6%), Sony Ericsson (7,3),LG (6,3%) and others.^[1] Nokia had a turnover of 19% that means 24.8 billion Euro. This Finnish company is the largest mobile phone producer in the world. One reason for the growth of Nokia in 2006 had been the situation of BenQ Siemens. Their market shares could be distributed among all other market participants.

In the following years, the worldwide market growth rates will not grow significantly because consumers have to be perceived to adjust their mobile phones to latest trends. A decrease of 5% is expected. Causes are the market saturation, long-time contracts and no innovations.^[2] In Germany, there is an expected increase of 3%, while turnover remains static.^[3] However, over the last few years, the German mobile market was also marked by a constant growth. Actually, Germany's 82 mio. inhabitants own more than 82.2 mio. mobile phones. Statistically, every infant as well as every elderly person possess a mobile phone. In reality, some people do not have a mobile phone while others own two or three. The turnover for cell phones had been 3.9 billion Euro in 2006. Companies mainly compete on prices in the mobile phone market. Therefore the mobile phone sales increased by 2% in 2006 compared to 2005 while the turnover stays constant.^[4] That means that approximately 32 million mobile phones had been sold in 2006. In 2005 the growth rate in the mobile market had been 10% and 17% in 2004.

According to current news releases, there can be spoken about market saturation in the mobile phone market. But the German market is one of the European markets that is not that as saturated as others.^[5] In the last years, the German cell phone market had been widely discussed in the news. Reasons for this have been the problems of the last German mobile phone producer Siemens with its mobile phone division and then finally the acquisition by BenQ. In the news, there is often the question of why did BenQ buy the mobile phone production from Siemens? Could one of the reasons be the potential of the German market? Since the announcement of the BenQ mobile phone division in Germany declaring bankruptcy, it is obvious that the German mobile phone production is at its end.

1.2 Structure of the thesis

In that thesis the current BenQ Siemens situation will be expatiated. First, there will be information about the Taiwanese company BenQ. This includes information on company itself as well as some highlights of its history which will be presented in order to provide an insight into the basics of BenQ. Furthermore, the current developments concerning the acquisition of the Siemens mobile phone division will be reflected. Afterwards, the market entry strategy of BenQ is observed in order to reveal the strategic reasons. Secondly, the Siemens company will be examined. The company’s past will be reflected upon and the present situation is discussed within BenQ´s present developments because of the linkage of both firms through the mobile phone division. Some thoughts about the future of the BenQ Siemens mobile phone division are made. In the end, the conclusion will contain some personal thoughts about the approach of BenQ just as about the acting of Siemens. Finally, there is to say that this thesis has been an ongoing work over a certain time period. Therefore definitions about expressions as past, current and future are made at that point. In that thesis, past means historical events, present means occurrences within year 2005/ 2006 and the future is defined as events in the year 2007 and afterwards to include the latest available information. The basis of that thesis is information from newspapers, professional journals, TV news and the Internet.

2. BENQ

2.1 Company Presentation

The BenQ Group was founded on April 21, 1984, and is an IT company acting worldwide. The headquarters are located in Gueishan, Taiwan. The multinational Group employs 18 000 employees^[6] in more than 70 countries. In 2005 the main sales areas had been in the Americas (35%), Europe (28%), Asia, Pacific, Africa, Middle East (together 19%) and China (18%). The Taiwanese BenQ tries to operate according to its name, which stands for the vision Bringing Enjoyment and Quality to Life (BenQ). The Chairman is Kuen-yao Lee and the president is Sheaffer Lee. Both of whom are Taiwanese business man. The BenQ Group consists of 11 companies that work independent but share resources and profit from synergy effects. The different companies are “ (...) AU Optronics Corporation, (...) Darfon Electronics Corporation; Daxon Technology Inc; Wellypower Optronics Co., Ltd.; Raydium Semiconductor Corporation; Airoha Technology Corporation; Cando Corporation; Darwin Precisions Co., Ltd,; BenQ Corporation; BenQ Hospital and BenQ Guru Software Co., Ltd. “^[7] In 2005, BenQ´s revenue was US$ 12,36 billion dollars.^[8]

2.1.1 Products and Services

BenQ classifies its products in three main categories. First: Computing, second: Consumer Electronics and third: Communications. Computing means the selling of products that are linked to the personal computer such as TV- sets, joybooks, keyboards, storage and monitors. But, computing suppose also the search for improvements and innovations such as recently launched LCD or Plasma monitors. The second sphere is the Consumer Electronics which is linked mostly to entertainment. These are products like cameras, projectors and displays. The third category is defined as Communications, meaning mobile phones. Today mobile phones cover various functions like communication, data transfer, music, cameras etc. BenQ tries to facilitate and improve human lifestyle through their products and services. Additionally, BenQ focuses on technology to maintain its position on the market in future. Technology includes Human Technology, Design Technology and Technology for Enjoyment.

BenQ owned following market shares in 2005: for 24% scanner, 14% projectors, 12% storage, 9,5% storage products and for 5% mobile phones.^[9]

In 2006 BenQ produced as a third of its turnover mobile phones, next to notebooks, LC-screens, flatscreens and digital cameras.^[10] In the past, BenQ produced especially in charge of other companies.

2.2 Company history

2.2.1 Past

According to the short general presentation of BenQ, I will go into details of BenQ´s history. BenQ´s history is also essential for the presence today and in future. First, I will begin with the past. Initially BenQ comes out of Acer Peripherals Inc., which was founded in 1984. In 1991, the name was changed into Acer Communications & Multimedia, probably due to marketing reasons and customer presence. Since 1996, the company expanded. In 1996, Acer Display Technologies Inc. and Darly Venture Inc. was established. In the next year, Darfon Electronics Corp. was built. Sales and marketing offices are located in Europe, America and Korea when the production facilities are in Taiwan (Tainan) and China (Suzhou). Darfon Electronics Corp. employees almost 14,000 people. Darfon develops and produces telecommunication components. The company acts worldwide and is viewed as the second largest supplier of keyboards for laptops and as the second largest supplier of LCD TV inverters. The company is growing due to the revenue 2004, 186 million US $, and 2005, 317 million US $. In 1998, Daxon Technology Inc. was founded. The company is the fifth largest manufacturer worldwide and is focused on thin-film technology products. The Daxon Technology Inc.´s headquarters is in Taiwan (Taoyuan) and the manufacturing locations were in Taiwan (Taoyuan), Malaysia (Penang) and in China (Suzhou). Daxon employs 2,384 employees and is growing comparing the revenue in 2004, 132,5 billion US $, to the revenue in 2005, 157 billion US $. The name BenQ appears the first time in 1998. BenQ Guru (Guru Systems) with headquarters and marketing and sales offices in Asia is established. BenQ Guru employs 350 employees and is an e-business solutions provider, such as supply chain management and human resources management. Finally in 2001, the BenQ company, with BenQ as the brand, is built. Headquarters is still in Taiwan, more exactly in Taoyuan and Taipei. For the first time in history, the company is not only oriented to Asia, but also to Europe and America. The sales and marketing offices are in Europe, America, Asia Pacific and China. The year 2001 brings other important events. AU Optronics comes out of the merger of Acer Display Technologies Inc. and Unipac Optoelectronics Corp. Additional Airoha Technology Corp. is established. Airoha Technology Corp. employs 90 employees and is specialised on wireless technology and products. AU Optronics headquarters, R&D Center and manufacturing operations are in Asia. The sales and marketing offices are in Asia as well as in Europe and North America. In 2003 Philips and BenQ´s Digital Storage comes out of Royal Philips Electronics and BenQ. The headquarters is in Taiwan but Sales and Marketing are handled by the BenQ Corp. Cando Operations joins the BenQ Group in the same year. Cando includes 578 employees and is focused on manufacturing large-size colour filters. Further the BenQ hospital had been built in 2004. There are two hospitals, one in Nanjing and one in Suzhou. Both hospitals share the focus on incorporated services, a scope of 4,500 medical beds as well as equipment planning and management consultancy. In 2005, the most important event occured. BenQ bought Siemens mobile phone assembly division and relaunched the Siemens mobile phones under the name BenQ Siemens as a sub-brand. BenQ would increase its market shares in the mobile phone sector. The acquisition of the Siemens mobile phone division is the current problem of BenQ and further explained under the point BenQ´ history, Presence (chapter 2.2.2). In the last year, 2006, the focus had been on IT and optical storage products. To strengthen its position, especially to become the world´s best TFT and LCD supplier, AU Optronics, bought Quanta Display. The latest event had been the set up of BenQ´s IMS Business Group for comprising BenQ´s manufacturing operations. The headquarters is in Taiwan (Taoyuan) and the manufacturing sites are in different countries: Taiwan (Taoyuan), China (Suzhou), Mexico (Mexicali) and the Czech Republic (Brno).^[11]

In sum, in BenQ´s past could be viewed, that the company is changing constantly. The BenQ Group is growing despite actual problems such as the difficulties with the BenQ Siemens cell phone division.

2.2.2 Present

The BenQ group has been present in the news, especially since the acquisition of the Siemens Mobile Phone division. To show the complexity of the actual BenQ Siemens discussion, it is essential to know about common basics of the two companies and the mobile phone assembly division.

In the beginning of 2005 Siemens announced that they had serious problems with the Mobile Phone division and that they were looking for a solution. In the first quarter of 2005, Siemens had a loss of 143 million Euro and significant sales slumps. BenQ announced the acquisition of the Siemens mobile phone division on 07.06.2005 including all gains and losses. The acquisition was on the first of October 2005. According to BenQ, Siemens had to buy BenQ shares for 50 million Euro and pay 250 million Euro for integration.^[12] BenQ has the rights to use the co-brand Siemens during the next five years on mobile phones and for 18 months exclusive rights for the brand name Siemens. In return, the Taiwanese company has to ensure a long-run of the business, especially in Germany. In actual free press articles, it is published that Klaus Kleinfeld, the CEO of Siemens, invested around 350 (400)^[13] million Euro in the mobile phone division before selling.^[14] BenQ invested around 800 million Euro in the German subsidiary. BenQ would amalgamate the Siemens mobile phone division with its own mobile phone division to increase gains and to profit from synergy effects. The partnership started in the beginning of the fourth quarter of 2005. The division employed 6000 employees. The intention of BenQ had been to become the fourth biggest mobile phone producer in the world and the biggest in Asia as a result of this acquisition. Siemens was willing to sell the division because the mobile phone division had been the loss-making division over the last few years. Christian Joos, the German BenQ-Mobile chief announced he was going to improve the mobile phone divisions quickly and to make profit through that division. Instead of increasing gains, BenQ also had problems with the mobile phone division. In July 2006, one year after the BenQ acquisition of the Siemens mobile phone division, BenQ announced to release employees. BenQ would like to economize 500 jobs in Germany. Jobs in the headquarters in Munich and external employees in Kamp-Lintford are concerned. The Taiwanese BenQ is looking for a solution. BenQ Mobile suffered from sales collapses and the loss of market shares. BenQ had serious problem with its German subsidiary from the beginning. For example: Mobile phones carried too late at sales points and the management had problems to be a unit. In the fourth quarter of 2006, BenQ achieved 51 million Euro in contrary to intended 391 million Euro.^[15] BenQ´s headquarters in Taipeh stopped to transfer money to its German subsidiary. In September 2006, the Taiwanese mobile phone producer BenQ announced its bankruptcy. 2000 of the 3000 employees looses their jobs immediately. It could be seen that the Taiwanese company economize high redundancy payments through its bankruptcy. BenQ shut the german facilities but will use the trademark BenQ Siemens and patents from Asia. From the announcement of the insolvency, the company has to be out of losses. It is forbidden to be further in the red figures. BenQ was given a legal time limit to find an investor and to run the last pars of the business further on.

2.2.3 Future

In 2006 it was expected that BenQ will sell the mobile phone division to an unknown outsourcing specialist in 2007. BenQ is the last German mobile phone producer and it would be crucial if that industry division were to close. In October 2006, there are more than 100 companies that are interested to buy BenQ Mobile. There are negotiations with 31 of those companies and insider told that BenQ negotiated particularly with two big companies: Foxconn, a Taiwanese company and Jabil, an American company. It was expected that BenQ would sell the production facilities in Europe and China. Instead BenQ said all the time that they don´t want to sell. BenQ spoke from modifications because of the problems of BenQ Siemens mobile phones. The company was thinking about the closure of the production facility in Mexico and probably China.^[16] To sell the mobile phone division would be the last possibility to save the BenQ Siemens mobile phone division and the belonging jobs. At the moment 3000 employees are concerned: 1600 in Kamp-Lintford and Bocholt and further 1400 employees in Munich. BenQ´s deadline to find an investor is at 31.12.2006 at 00:00. If BenQ cannot find an investor, the company will be closed and went into insolvency. The insolvency administrator Martin Prager said the possibility to find an investor is 50%. But the probability to find an investor until the end of 2006 is low. It would be better for an investor to buy in January 2007. Then the investor can takeover BenQ mobile without employees and brownfield like pension payments. That would be the only chance for the company, however bad for employees. The main problems to discuss are the rights to the brand name and patents. Until these two essential points are clarified, there will be problems to finding an investor. The insolvency administrator says that potential investors can receive information about these discussable points but other say that these two points are not clear enough. Another discussable point had been how much gains would be possible in future. On Friday morning, 28.12.05, one of the two investors jumped off of the negotiations due to its financial situation.^[17] The last promise had been to find investors that will at least buy parts of BenQ Mobile but it is doubtful if there could be found an investor who wants only to buy parts. But when investors buy parts they don´t have to takeover commitments concerning employees. Best chances are expected for the BenQ subsidiary Inservio. It is known that there is an investor who will eventually busy the subsidiary and employ further 900 BenQ employees. But there is no concrete offer.^[18]

On second January 2007, three month after the insolvency announcement, the insolvency administrator Martin Prager announced that he had not received a single offer from an investor. BenQ Mobile announced its final insolvency. The court of Munich opened the insolvency process on 03.01.2007. The insolvency administrator tries to make use of the BenQ mobile assets in the best way to satisfy the creditors. Theoretically, it is still possible to sell the BenQ Mobile division to an investor but not likely. 90% of employees went into a rescue company. That means that BenQ Mobile employs still 260 employees because of the end production until the end of January. End production means that all semi-finished mobile phones will be finished in the facility in Kamp-Lintford to sell them. 160 employees will work until the final closure.^[19] According to latest press news in January, 400 employees found new jobs. 150 employees restart working at Siemens and the rest belongs now to so-called transfer companies in Bavaria and North Rhine-Westphalia, which are mostly financed by Siemens.

It is still possible to find an investor but it is more difficult to run the production the longer the production lines don´t run.

2.3 Potential investors

BenQ Mobil is now looking for investors. In the beginning of 2007 there had been several companies that were interested in BenQ Mobil. Consecutively the most recent candidates are shown in order to explain their businesses and intentions.

[...]

^[1] http://www.espace.ch/artikel_311424.html, 11.02.07

^[2] http://www.inside-handy.de/news/6959.html, 10.01.07

^[3] http://www.pressetext.at/pte.mc?pte=060929036, 10.01.07

^[4] http://www.bitkom.org/de/presse/43408_41678.aspx, 19.01.07

^[5] http://www.dw-world.de/dw/article/0,2144,2137023,00.html, 10.01.07

^[6] http://www.benq.com/page/?pageId=2, 24.11.06

^[7] http://www.benq.com/page/?pageId=3, 25.10.06

^[8] http://www.benq.com/page/?pageId=5, 12.11.06

^[9] http://benq.com/page/?pageId=5, 04.01.2007

^[10] http://www.manager-magazin.de/magazin/artikel/0,2828,bild-691696-427713,00.html, 05.01.07

^[11] http://www.benq.com/page/?pageId=3, 11.12.06

^[12] http://www.benq.de/press/news.cfm?id=995&cat=0&year=2005, 10.12.06

^[13] Saarbrücker Zeitung NR.2, Seite A6, 04.01.07

^[14] http://www.stern.de/wirtschaft/unternehmen/unternehmen/572777.html?nv=ct_mt, 10.12.06

^[15] http://de.today.reuters.com/news/newsArticle.aspx?type=topNews&storyID=2007-01-03T142012Z_01_KOE351599_RTRDEOC_0_DEUTSCHLAND-FIRMEN-BENQ-ZF.xml, 03.01.06

^[16] http://www.spiegelgruppe.de/spiegelgruppe/home.nsf/pmweb/BB855CEFD0E80BB2C12571EF003 0AF28, 29.12.06

^[17] http://www.wdr.de/themen/wirtschaft/wirtschaftsbranche/benq/061229.jhtml?rubrikenstyle=wirtsch

aft, 02.01.06

^[18] http://www.businessnews.com/business/art614,283628.html?fCMS=e523b5c6c9b9d1e9e11474abc1c95937, 03.01.07

^[19] http://www.wdr.de/themen/kurzmeldungen/2007/01/01/hiobsbotschaft_fuer_benq-mitarbeiter.jhtml?rubrikenstyle=wirtschaft, 01.01.07; Saarbrücker Zeitung NR. 2, Seite A6, 04.12.06