The dramatic entry of a new Asian player on the global marketplace by Taiwan-based BenQ, through the acquisition June 8 of industrial giant Siemens’ entire mobile telephone operation, confirmed again that the new breed from the East are not risk-averse and in fact are compelled to take such risks to make their mark.

Following the pattern set by TCL and Lenovo in their acquisitions and even China National Offshore Oil Company and Shanghai Motors who either have been rebuffed or hesitated, BenQ has ventured into the same realm of entering into distressed or even failing Western enterprises.
This particular transaction also presented a number of unusual twists and tips for the future.In fiscal 2004, Siemens' mobile phone business lost €280 million, with the losses continuing into the new fiscal year. Siemens' world market share in mobile phones had dropped to 5.5 percent, from 8 percent a year earlier.
Siemens agreed to "provide net cash payments of €250 million for ongoing support of the business". In addition, the German firm will spend €50 million to buy 2 percent of total BenQ shares.
The divestment is expected to cost Siemens some €350 million and must still be approved by Germany's cartel authorities as well as by BenQ shareholders. The deal is expected to be completed by the end of September.
Under the takeover, the Taiwanese firm will use the Siemens brand name for a period of five years in what company chief executive Klaus Kleinfeld said would provide "a sustainable perspective for our mobile phones business".
Siemens employs some 6,000 people worldwide in its cellphone operations, about half of those in Germany. Under the deal, BenQ will guarantee the jobs up through the summer of 2006 under an existing wage and benefit cut agreement with workers.
This transactions seemed even more unusual because it was also reported to have been chosen over another Western competitor. Motorola was said by industry sources to also have been negotiating with Siemens, but was unsuccessful reportedly because it refused to guarantee the security of the thousands of Siemens workers at the German plant.

BenQ, which had a low-profile presence in Europe prior to the Siemens deal, was spun off from the Taiwanese computer producer Acer some four years ago and has been designing and manufacturing products for other firms but has increasingly sought to promote its own brand of televisions, monitors, and phones. About 60 percent of its production is for other companies.

While it has its roots in Taiwan’s high-technology surge of the past decades, BenQ has also recently become identified by a strong presence in Mainland China, where it has some 8,300 employees and facilities estimated at $123 million in value. The BenQ chairman swiftly sought to underline this duality, by immediately holding a press conference on the transaction in Beijing.

The head of BenQ, variously identified as K.Y. Lee and Kuen-yao Lee also remarked to the magazine Spiegel that:

"European industry has typically lost some of its competitive edge in the rapidly growing sectors. Whenever a technology relies on highly personalised applications - in other words, when one needs to keep in close touch with consumers' needs - the Europeans are unable to keep abreast of developments. We Asians, on the other hand, were long accustomed to not owning anything. So we are willing to constantly adapt to new situations. ... Siemens stands for reliable products and has long enjoyed an excellent reputation in Asia. I think it's a good idea to combine this name with the vigorous, youthful and innovative image of BenQ."
Despite the losses suffered by the German firm, Lee stressed BenQ decided to take over all assets and liabilities of the handset unit of Siemens.
Lee said the takeover will enable BenQ to become the fourth largest handset maker in the world and the largest mobile phone technology company in Greater China. The BenQ chairman said that "with the acquisition of Siemens' mobile phones business, we are rapidly approaching our goal to become one of the world's leading players in the mobile phone industry".
He also said his firm will be able to make Siemens AG's loss-making mobile handset unit profitable in two years. "We can achieve a profit quickly because we have sales and distribution channels globally," Lee told reporters at a press briefing. "We complement each other. What Siemens has, we don't. What we have, Siemens doesn't."
BenQ plans to produce combination handsets with MP3, laptop and mobile phone combinations, Lee said.
While the deal could provide a temporary reprieve for the Siemens work force, it also may also be short-lived good news for another element of German industry based at chip-maker Infeneon which supplied vital components for the Siemens mobile phones. Infeneon will have to henceforth compete with other of BenQ’s traditional suppliers in Taiwan and China. Infeneon, formerly part of the Siemens empire sells some 25 percent to 40 percent of Infineon's total cell-phone chips to Siemens.
Taiwanese analysts saw benefits for BenQ in the linkup, saying it could help promote BenQ-brand cellphones on the world market and upgrade BenQ's capability in developing third-generation (3G) cellphones.
One said "Siemens cellphones are popular in the US and Europe, but not on the newly-emerging markets." He added BenQ lagged behind Nokia and Sony Ericsson in third- generation mobile phones, but that "after the takeover, BenQ can use Siemens' R&D talents to upgrade its capability to develop third- generation cellphones".

But Credit Suisse First Boston analyst Alison Yip said she cut her recommendation on the stock to "underperform" from "neutral" after the transaction announcement.

The analyst added that it could take some time for the new owner to absorb and turn the loss-maker around. The Siemens debts and pension fund costs may also make the deal difficult. "We question how BenQ can turn around Siemens' mobile devices division over the medium term, given BenQ's weak financials and its problem on delivering" cost cuts, the Hong Kong-based Yip said in a research report.