Gigabyte Technology, one of the world’s largest makers of mainboards, has released certain official details on the matter of its joint-venture with Asustek Computer. Apparently, the company finds the current market environment uneasy to compete in and believes that a larger company has higher chances to become a success. Asian media reports that Asus-branded goods will continue to be supplied, while the new products under Gigabyte brand will be produced by the new company.
According to the Institute of Information Industry (MIC), the total value of mainboards produced in 2005 was $8.9 billion, a growth rate of only 2.2% from year 2004. The total value of motherboards made for the first half of 2006 has fallen to $3.67 billion in comparison to the $3.75 billion for the first half of 2005. In addition, leading brand system builders have gradually increased their market share, causing the market of standalone mainboards (particularly, channel and retail markets) to shrink considerably.
“In this slow developing market environment, Gigabyte seeks to establish an alliance with Asustek Computer in order to assist the operation efficiency of Gigabyte’s motherboard business,” a statement by Gigabyte reads.
Apart from increased efficiency, Gigabyte believes it would have more resources to expand “their diversified business”. Particularly, the creation of the joint-venture will pull additional engineering teams into Gigabyte, which will allow the company to develop more competitive products.
“Because of the increasingly mature nature of the motherboard industry, this joint venture will combine the resources of two leading motherboard manufacturers, allowing for a greater economical impact on the market, better research and development capabilities and elevated product quality,” the statement claims.
Gigabyte Technology itself will cease to produce its own-branded Gigabyte mainboards and graphics cards, according to reports by some web-sites. As a result, all new products sold under Gigabyte name will be developed and manufactured by the newly formed venture. At the same time, Asustek will not cease production of its own-brand mainboards and graphics cards. While Asus declines to make any comments regarding the joint-venture, it seems from the current perspective that Asus plans to make an investment into a joint-venture with Gigabyte just to create a strong player able to more successfully compete not only against Foxconn, but also against second-tier mainboard makers.
Manufacturing capacities of the newly formed joint-venture are unknown.
The initial capital of the joint venture will be NT$8 billion (Taiwanese dollars), which is about $243.3 million or ?189.69. Gigabyte will have 51% of the company and will receive chairman of the board position along with 3 seats in the director’s board, while Asustek will have 49% stake in the yet unnamed joint-venture and two seats in the board. The new company will supply mainboards and graphics cards under Gigabyte brand-name starting from the 1st of January, 2007.
Gigabyte believes that this “strategic alliance” will create a win-win situation for shareholders, employees and customers.