BenQ Mobile bankruptcy prompts Infineon to cut jobs

The insolvency of German handset maker BenQ Mobile continues to reverberate in the mobile phone sector. On Tuesday, chip maker Infineon said it will lay off workers and take hundreds of millions of dollars in charges after losing BenQ Mobile as a customer.

Infineon said it will lay off 400 workers globally and take charges in the 2006 financial year totaling €80 million ($100.4 million) due to losing BenQ Mobile as a communications chip customer. The company also trimmed its 2007 sales expectations by €150 million. Infineon could face additional restructuring charges of €30 million related to laying off workers in its communications business.

Sales at Infineon's communications chip business had already been dropping significantly as BenQ Mobile lost market share in recent quarters, Infineon said. The falling sales prompted it to seek new customers, which it found in Samsung and LG Electronics.

Still, the company does not expect those new customers to make up for the gap left by BenQ Mobile. The chip maker will also continue to provide a steady supply of chips to BenQ Mobile's former parent company, Taiwan's BenQ Corp.

BenQ Mobile is currently working under bankruptcy protection on a plan for a comeback, but one that will leave 1,900 of its roughly 3,000 employees without jobs. The company is expected to forsake its namebrand mobile phone business when it emerges from bankruptcy, and instead design handsets for customers such as mobile operators.

The phone maker changed its name to BenQ Mobile after being taken over last year. Siemens paid BenQ Corp. to take over its loss-making handset division in a bid to revitalize the unit. BenQ wasn't able to stem the decline, despite pouring hundreds of millions of dollars into the venture.

Analysts reckon that stiff competition in the mobile phone market sank the venture. Nokia and Motorola have gained market share so far this year, while BenQ and other smaller makers have lost share.

The IDG News Service is a Network World affiliate.