The closure of the facility is part of a massive restructuring effort parent company BenQ announced last month, after it failed to make good on a promise to turn around its financial performance in the second quarter. The company's mobile phone business has struggled ever since it took over Siemens AG's loss-making mobile phone division in a high profile deal last year.

It also highlights cut-throat competition in the mobile phone industry as leaders such as Nokia and Motorola grab market share. The handset business had proved so tough for Siemens that it agreed to pay BenQ ¬250m ($317m) to take the ailing division off its hands. BenQ has posted losses for the three quarters that have passed since the deal was finalised.

The Taiwanese handset facility will close by the end of this year, affecting over 100 workers. Foreign workers invited to Taiwan to work the factory floor will be sent home, while some Taiwanese labourers will retire and others will be relocated to other BenQ factories, says Albert Lin, a communications officer at BenQ. The operation accounts for less than 10% of BenQ Mobile's handset production.

"This is part of BenQ Mobile's plan to cut costs and increase efficiency," he adds.

He also called news reports from Germany, which say BenQ Mobile plans to sell or close all of its handset factories and farm production out to a contract manufacturer, 'speculation', and refused further comment.

It is the second series of layoffs announced by the mobile phone maker so far this year. In July, BenQ Mobile said it planned to cut 277 jobs at its facility in Munich, Germany, in addition to releasing 250 German contract employees who work offsite.

BenQ Mobile's parent company, BenQ, also plans to restructure its operations in an effort to increase cash available to finance BenQ Mobile as it struggles toward profitability.

BenQ last month said it would split its name brand division and manufacturing operations into separate companies, a change that would not affect its mobile phone factories. BenQ Mobile planned to continue producing its own handsets due to the degree of customisation required by network operators, among other reasons, Clemens Joos, CEO of BenQ Mobile, said at the time.

BenQ Mobile faces an uphill battle to return to profitability, mainly because larger rivals have stepped up the competition and are grabbing market share from smaller companies in the industry. BenQ's share of the handset market dropped to 3,2% in the second quarter, from 4,8% the same time last year, according to market researcher Gartner. Meanwhile, Nokia's share rose to 33,6% from 31,6%, and Motorola's share increased to 21,9% from 17,7%.