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Hon Hai to forge closer ties with notebook makers

The nation's largest maker of computer components, Hon Hai Precision Industry Co (鴻海精密), plans to forge closer ties with the world's largest notebook manu-facturers, chairman Terry Kuo (郭台銘) told Chinese-language media yesterday.

He plans to team up with Quanta Computer Inc (廣達電腦) or Compal Electronics Inc (仁寶電腦) and then approach global notebook brand-name companies together with his new partner in an effort to win more orders, the reports said.

The announcement may quell fears that Hon Hai intends to manufacture its own notebook computers and compete with its customers.

At the end of last month, Hon Hai broke ground on a new thin-film transistor liquid-crystal display (TFT-LCD) plant in Miaoli's Chunan Science-based Industrial Park, creating the final manufacturing facility for components it needs to make its own computer systems.

Kuo stressed that Hon Hai would "concentrate on the manufacture of desktop systems."

Analysts say that Kuo was trying to placate customers and reassure them that he does not intend to encroach on their turf.

"The company is stressing that it is a design partner and not a competitor by this announcement," said William Fong (方偉昌), an analyst at Primasia Securities Co.

But Hon Hai has seen its desktop PC business slide as global demand for these products has dropped, Fong said.

The company recently switched to more popular products like game consoles, personal digital organizers and mobile phones to ensure its profitability.

Business relationships in the very competitive notebook industry are often hush-hush.

"Hon Hai has been supplying Quanta with components such as enclosures and connectors for many years," Fong said. "They have had a business relationship that was previously secret. Now Kuo wants to make it more open."

Closer relations with Quanta or Compal will be good for Hon Hai, another analyst said yesterday.

"The intention is that Hon Hai will approach major tier-one customers together with Quanta [or Compal]," said Tony Tseng, an analyst with Merrill Lynch Co in Taipei.

"Hon Hai will continue to focus on items such as enclosures and components," he said.

"Hon Hai should gain more orders as a result of a closer relationship, so this is definitely good news for Hon Hai," Fong said.

Kuo also denied that Hon Hai is planning to acquire Arima Computer Corp (華宇電腦), a notebook-computer maker.
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