To stem unsustainable losses at BenQ’s mobile operations, BenQ Corporation’s board of directors had decided to discontinue capital injection into BenQ Mobile GmbH & Co OHG, its German mobile phone subsidiary, the former Siemens’ mobile phone unit acquired by BenQ in October 2005.

“Since October 2005, we have committed and invested an inordinate amount of capital and resources into our German mobile phone subsidiary. We have worked alongside our German colleagues from the beginning and were able to achieve quite a number of milestones. Despite the progress achieved in reducing cost and expenses, widening losses have made this very painful decision unavoidable,” said KY Lee, BenQ Corp. chairman.

Even though BenQ and Siemens have managed to release several successful mobile phone models, market share of BenQ-Siemens combined was only 3.2% in Q2 2006, whereas Siemens’ market share in Q2 2005 was 4.8%, moreover, mobile phone shipments in Q2 2006 decreased by over 20% year-over-year, according to Gartner Research. Moreover, the German subsidiary continued to lose money and could not increase the pace of new models introduction.

“We have been trying to improve the cost structure of our handset subsidiary BenQ Mobile in Germany for over the past year. However, the costs there were not falling as fast as we had expected, while the introduction of new products was lagging far behind schedule,” Mr. Lee added at a press-conference in Taipei, Taiwan, reports DigiTimes web-site.

The subsidiary is considering filing for insolvency protection. BenQ Mobile GmbH & Co OHG’s operations in Germany, including Munich, Bocholt and Kamp-Lintfort may be affected. Other subsidiaries in Brazil and other locations are reviewing their financial position. BenQ will continue its branded mobile business in selected markets leveraging its existing research and development (R&D) as well as manufacturing operations in Asia.

Under the terms of the agreement with Siemens, BenQ will continue to use Siemens brand-name as well as market phones under BenQ-Siemens trade-mark. The future cell phones will be designed in different R&D locations of the company.