05.30.2001
Db Tel getting big on OBM in China - facing a great wall?

• Db Tel (5304 'Da Ba') has announced it will completely transfer its OEM handset operation for Motorola to its China subsidiary. The company is also striving to upgrade OEM operation to ODM in the subsidiary. The company has moved all manufacturing operations overseas, mostly to China. Db Tel intends to concentrate on own brand manufacturing (OBM) in the future.

• Db Tel anticipates handset shipment will decline to around 1.4m units in 2001, a third of the 2000 figure. Db Tel has withheld disclosure on handset shipment for 1Q01, as quantities are expected to be quite low.

• VB Primasia Investment Opinion: We are doubtful that Db-Tel, or its subsidiary, have the capability to upgrade to ODM, a process that would ultimately lead to higher profit margin. OEM has in the past resulted in quality problems. We are cautious on Db Tel's move into OBM as competition in the China market is very fierce. We recommend AVOID.

BennyLo@Primasia.com +886-[0]2-2547-8869