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German conglomerate Siemens AG is beginning to downsize staff in its money-losing handset business in China, following its plan to sell its handset unit to Taiwan-based BenQ early this month.

"We are having difficulties in our handset business and the downsizing plan has long been within our readjustment plan," said Wang Chuandong, marketing director of Siemens Ltd (China), Siemens AG's operation in China.

Wang said a staff-reduction plan is being carried out and will be finished very soon.

Staff to go are mainly related to the handset marketing and after-sales unit.

But he refuted the rumour that more than 80 per cent of the staff members in its handset business will be sacked.

The company has employed more than 1,900 staff in the handset unit in China.

"There will be no big change. For example, the research and development and product team in China are not affected by this move," he said.

Wang declined to elaborate on how many staff will have to leave Siemens Ltd (China).

"This is a consequence of the energize mobile division programme, where Siemens is reviewing the business set-up in selected countries," Siemens said Wednesday.

"All affected employees have been personally informed. We are trying to identify other opportunities for the affected employees in the Siemens organization or partner organizations in China," it said.

According to Wang, a compensation package is prepared for all affected employees, which exceeds the legal requirements to acknowledge their contribution.

"This action will streamline the business in order to gain efficiencies and to orient towards profitable growth," he said.

Siemens said that to achieve this, it will implement a new channel strategy, which will involve co-operation with geographically focused local channel partners. Processes will be simplified and tailored to meet the needs of the entire value chain.

According to Wang, Siemens Ltd (China) is to roll out eight new handset modes in China starting in August.

In another development, Siemens Ltd (China) said Wednesday that all the measures taken are solely based on the performance of the Siemens mobile division in China and are independent of the BenQ announcement.

"We have informed BenQ about this decision and the rationale behind it and BenQ agreed to the measures now taken," it said.

Early this month, Siemens AG announced that BenQ Corp agreed to take over its unprofitable mobile-phone unit.

BenQ is among the leading mobile phone makers in Taiwan in addition to other consumer electronic products like digital cameras, notebook computers and scanners. Last month, the mainland government granted BenQ licences to produce mobile phones.

Under the agreement, Siemens will take a pre-tax charge of 350 million euros (US$455 million) related to the unit's disposal in the quarter ending September. Siemens will also buy 50 million euros (US$65 million) worth of new shares in BenQ, giving it a 2.5 per cent stake in BenQ.