To reflect increasing component, material and labor costs in China, Taiwan handset makers may succeed in raising ODM prices in 2011 or at least will be able to maintain current quotes, according to industry sources.

Labor costs in China are expected to rise by over 10% annually over the next few years, the sources pointed out. This, plus increases in component/material costs, offer some bargaining power for Taiwan-based handset makers to negotiate 2011 ODM prices with existing or new clients, the sources indicated.

However, Taiwan-based makers have to consider long-term partnerships, of which some clients have suffered operating losses, the sources pointed out. Although some handset vendors still issue RFQ (request for quotes) to seek ODM suppliers, more vendors will continue partnerships with ODMs, the sources noted.

In addition, Taiwan-based makers have to consider competition. Foxconn used to bring large competitive pressure on other makers by offering lower prices through integrating procurements of all materials and components, the sources said. However, Foxconn has not launched price wars for the time being because it has asked for price hikes to offset its large upward adjustment in employee wages, the sources indicated.