even China's formidable strengths as a low-cost manufacturing location
can save a doomed business. That's our take on BenQ's decision to lay
off half of the more than 800 employees at its Shanghai handset factory
before the end of the year.

The loss-making Taiwanese electronics company made a big mistake in
buying Siemens' mobile phone operations and now it is paying a heavy
price for the error.

The cuts in the Shanghai work force will start this week and be
implemented in phases as part of BenQ's plan to streamline production,
according to a company statement.

The announcement comes as BenQ struggles with the fallout from its October 2005 takeover of Siemens' mobile phone operations.

After investing an “inordinate amount of capital and resources” in
the loss-making German business, renamed BenQ Mobile, the Taiwanese
parent turned off life support last month and laid off 1,900 of its
3,000-strong German workforce.

The Taiwanese electronics company, which is best known for products
such as LCD monitors, has posted four consecutive quarterly losses and
its share of the global mobile phone market has fallen
from 4.7% to just 2.4% over the past 12 months according to Gartner
Dataquest. Market leaders Nokia and Motorola have shares of 35% and 21%

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