Siemens Handset Supply Chain Problem

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Siemens Handset

Analysis of the supply chain problems in the failure of Siemens Handset

2011/4/22


Content:
Introduction4
Introduction of Siemens4
Siemens Mobile Phone4
BenQ-Siemens Mobile Phone6
Siemens Mobile Phone Industry6
Production & Supply Chain6
Product Clockspeed8
Supply Chain Integration9
Retailers & Distribution9
Customer Value10
Location14
BenQ-Siemens14
Merger of BenQ-Siemens14
Temporary Win-win Situation14
ODM Background of BenQ15
Redesigned Supply Chain16
Integrated by Function16
Integrated by Distribution17
Pitfalls of BenQ-Siemens17
High Production Volume, Low Market Share17
Re-assessment of Suppliers19
Outsourcing as BenQ’s first aid20
Threat of New Entrants20
BenQ Outsourced to ODM21
Benefits of Outsourcing23
Failure of the Merger24
Summary24
Reference:26

Introduction
Siemens Mobile Phone industry failed a few years ago. The industry was sold to BenQ and BenQ shift the most of mobile phone markets to China. However, they did not do very well, either. A lot of researchers focus on analyzing their marketing strategies which led to failure. This analysis, however, will analyze the reason of failure and mostly focus on Asian Market from a supply chain perspective.

Introduction of Siemens
Siemens was founded in 1847. Beginning with advances in telegraph technology, the Company quickly expanded its product line and geographic scope, and was already a multi-national business by the end of the 19th century. Now, Siemens has been expanded its position in electrical markets of the United States, Western Europe and Asia. It also focuses on much more industries, though most of them are related to electric, such as electronic railway, household appliances and radio, healthcare instruments and so on. Mobile Devices was also one of its industries.

Siemens Mobile Phone
Although net profit of the whole company was increasing through all the years, Siemens Mobile Devices continued suffering deficits through 2004-2005. Mike Dano, 2005, indicated that Siemens AG (its semiconductor manufacturing company) announced it intends to cut out its bleeding mobile-phone business by spinning it out as a "separate legal unit.'' In May, 2005, Siemens' second-quarter net profit dropped 35-percent, the failures of its mobile-phone and IT operations are some of the factors, and quarterly handset rankings showed that Siemens dropped to sixth place from No. 5 position before. According the same report, Siemens reported a loss of $179 million in its sickly mobile-phone business. This is a reverse on its profit of year 2004. Statistics of global sell-in and market share status were shown in table 1 and 2 as following. It world-widely estimates top 6 vendors. It suggests that Siemens sold only 9.3 million phones in its first quarter of 2005, which made Siemens fall into the last place of the world's major mobile-phone makers. Furthermore, Siemens' market shares dropped by almost 30 percent during 2004 while the rest of the world's major phone makers managed to increase share. Table 1 Global Handset Sell-in (m) 2004-2005Q1

Global sell-in (m)
Quarter 1 2004Year of 2004Quarter 1 2005
Nokia44.7207.653.8
Motorola25.3104.528.7
Samsung20.186.624.5
LG8.844.411.1
Sony Ericsson8.842.59.4
Siemens12.849.49.3
Others36.6145.535.2
Total157680.5172
Global share (%)
Quarter 1 2004Year of 2004Quarter 1 2005
Nokia28.530.531.3
Motorola16.115.416.7
Samsung12.812.714.2
LG5.66.56.45
Sony Ericsson5.66.25.5
Siemens8.27.35.4
Others23.321.420.5
Total100100100
Total growth %44.1%31.6%9.5%
Table 2 Handset Brands Global Share (%) 2004-2005Q1

BenQ-Siemens Mobile Phone
In 2005, the Taiwanese company BenQ acquired the financially bleeding Mobile Devices business from Siemens and subsequently released mobile phones under the BenQ-Siemens brand from its German unit. The...
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