UPDATE 2-Top cell-maker Foxconn falls on Motorola's woes

(Adds details, analyst's comment)

By Vinicy Chan

HONG KONG, June 24 (Reuters) - Shares in Foxconn International (2038.HK), the world's top contract maker of cellphones, slid 6 percent to their lowest since 2005 on Tuesday on fears sputtering global demand and market share losses at major client Motorola (MOT.N) will hit its earnings.

Investors also dumped its Asian rivals including BYD Electronics (0285.HK) and Taiwan's Compal Communications (8078.TW) after Motorola's shares fell.

Contract manufacturers are grappling with slowing U.S. sales, rising production and labour costs, and dwindling global demand in the midst of an economic downturn, but some analysts say Foxconn is a relative bargain after recent falls.

Foxconn stock was down 6 percent at the midday break in a broader market .HSI down just 0.3 percent. BYD Electronics slid 5.2 percent and Compal ended 6 percent lower.

"It (Foxconn) lacks a catalyst and the market generally has a pretty cautious outlook on the stock as it faces headwinds such as rising production cost and softening global handset demand," said Frederick Wong, analyst at BNP Paribas.

"But I still rate it as a buy, because at a single-digit price earnings level, it's such a good bargain."

Motorola, which along with Nokia (NOK1V.HE) ranks among Foxconn's top clients, fell 7 percent on Monday to a 5-year low after analysts downgraded it on fears it cannot staunch market share losses in North America. [ID:nBNG194861]

Competition is intensifying in the global cellphone arena at a time economies in the United States and Europe are in danger of slowing sharply. An aggressive Samsung Electronics (005930.KS) and LG (066570.KS) are grabbing market share across the world -- at the expense especially of Motorola.

CHINA ALSO NOT SO STRONG

IT consultants IDC said Motorola lost nearly half its global market share in the first quarter compared to the same period a year ago, and its sales slid nearly 40 percent in January to March period.

Even China, the world's largest mobile phone market, may not be quite as bright a spot as anticipated for cellular vendors.

"Given ongoing global macroeconomic concerns and recent checks in China indicating potential softness in handset sales ahead of the Olympics, we have reduced...our overall 2008 handset forecast," analysts PiperJaffray said in a note on Monday.

PiperJaffray expects global handset sales growth to slow to 10.1 percent in 2008 from 11.5 percent the year before, to about 1.27 billion units.

Yet other analysts expect growth in handset outsourcing to accelerate this year as hard-pressed firms seek to lower costs, while arguing a share sell-off has been overdone.

Foxconn has lost nearly a tenth of its value this week, and half its value this year.

The worst performer in Hong Kong's benchmark Hang Seng Index .HSI on Tuesday, Foxxconn is trading just below 9 times 2009 earnings, according to Reuters Estimates versus BYD trading at 5 times 2009 earnings.

"The entire cellphone industry is going through a period where the strong will survive and the weak will get eliminated," Foxconn Chairman Samuel Chin told reporters last week.

"Even as the business environment worsens, we should be able to stay competitive and deliver growth." ($1=HK$7.8) (Additional reporting by Parvathy Ullatil; Writing by Edwin Chan; Editing by Anshuman Daga)