01.30.2001
Winners from Chung Hwa ADSL outsourcing contract delay

• Due to unresolved pricing differences in its tender documents, Chung Hwa Telecom (2412 'Chung Hwa') has postponed its 1.26m ADSL outsourcing contract until the 27th Feb., 2001.

• As the company still needs ADSL for 1Q01, we expect it to approach last year's contract winners. These include Lucent (U.S.), Nokia (U.S), Zyxel Communications Corp. (2391 'He Qin') and Tecom Co. Ltd (2321 'Dong Xun'). We consider this positive news for Zyxel and Tecom over the short run.

• Once bitten twice shy Nokia won an outsourcing contract in 2000 at the rate of NT$6,900 per unit, but afterwards claimed that they lost money. Nokia is now unwilling to bid under NT$7,000 per unit for the contract. This is despite Nokia being the only tender that passed the beauty contest of Jan. 2001.

• We expect that Taiwan manufacturers will see higher profit margins than the current 10% if Nokia or Lucent wins a tender price above NT$7,000.

BennyLo@Primasia.com (886 2) 2547-8869