Asustek Computer Inc (華碩電腦), the world's largest maker of motherboards, has announced two major link-ups in the past two weeks, one a partnership and the other an acquisition, which ana-lysts believe will pave the way to the ultimate separation of its brandname and contract manufacturing operations.
"Asustek is now poised to beef up its original design manufacturing [ODM] business, which is in line with its goal of splitting it from the brandname operations in a three-year timeframe," said Vincent Chen (陳豊丰), an analyst with CLSA Ltd (里昂證券) in Taipei.
BIG PLANS
Jonney Shih (施崇棠), Asustek's chairman and chief executive, wants to spin off its ODM operations over the next three years to allow its emerging brandname notebook business to grow without hurting the contract manufacturing side.
"We have to acknowledge that brandname conflict or concern will always be there. We are planning to do the same as Acer Inc and Wistron Corp (緯創)," Shih was quoted as saying by the Financial Times on Sept. 30.
Acer, the nation's third-largest computer-maker by market value, spun off its contract manufacturing and design operations into Wistron, an individual outfit which was listed in 2003. Acer has then focused on marketing rather than research and development.
According to Chen, Wistron struggled in its first few years to beat more established players such as Hon Hai Precision Inc (鴻海精密), mainly due to a lack of comprehensive technological capabilities.
Shih admitted that such experience has made him cautious about following in Acer's footsteps.
BUILDING STRENGTHS
"What Asustek is doing now is beefing up its contract manufacturing strengths in different areas, paving the way for it to become a full-fledged electronics manufacturing services giant to compete with Hon Hai or Wistron," he said.
In the past two weeks, Asustek has announced that it will form a strategic partnership with Advantech Co (研華), an industrial computing service provider, and acquire Askey Computer Corp (亞旭電腦), a wireless local-area-network equipment maker.
Asustek will hold 15 percent of Advantech's shares and Advantech will own about 1.4 percent stake in Asustek.
The two are also planning to establish a new joint venture, tentatively named AdvanSus (研碩), by the middle of next year, which would be Asustek's first foray into the industrial computing sector.
Asustek will also acquire Askey through a 100 percent share-swap, which will be completed by March 1 next year.
Askey is the world's top Asymmetric Digital Subscriber Line (ADSL) modem maker and No.2 cable-modem maker. Asustek is the No.3 cable-modem maker.
With these synergic links, Chen said, Asustek will have a more complete product line and technologies, extending its foothold from commercial and consumer computing into industrial computing as well as network communications.
Allan Pu (卜正倫), an analyst with SinoPac Securities Corp (建華證券), thinks Asustek is moving in the right direction in expanding its business portfolio.
RIGHT TRACK
"It is on the right track as these strategic alliances will create more resources and at the same time complement its clientele base, boosting diversified orders as well as offering more room for business growth for all parties," he said.
The partnership with Advantech will not bring Asustek significant revenues since Advantech's output is only about 5,000 units per month, compared to the 4 million to 5 million units of motherboard that Asustek produces a month, he said.
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