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Following the concerns about potential conflicts between Asustek Computer and its clients among computer and electronic suppliers, the company’s chairman said that the world’s largest maker of mainboards will spin off its electronic manufacturing service (EMS) unit by the end of the year. Earlier it was believed that Asustek will split up in Q1 2008.

Asustek chairman Jonney Shih is reported to have said that after the separation the contract-manufacturing operation will dedicate itself to the goal of becoming the world’s No.1 EMS provider, according to China Economic News Service (CENS) agency. The top executive of Asus was quoted as saying that in a competitive industry like contract PC manufacturing the only choice is being the top player.

For several consecutive quarters Asustek’s clients like Apple, Dell, Sony and Toshiba have criticized the company’s double identification business approach, under which Asus offers contract manufacturing and also sells own-brand solutions that compete against products it makes for third-parties, and threatened to reduce orders to Asus.

According to some rumours, the company’s Q2 revenues will drop 40% from Q1’s 6.68 billion (NT$222.5 billion) to about $4.2 billion (NT$140 billion). Asustek’s earnings for April and May were about $2.853 billion (NT$93.5 billion). However, it should be noted that Asustek’s EMS revenues have been on the decline since February, whereas own-brand operation dropped substantially in April and continued to decrease in May, therefore, the reduction of the earnings should not be attributed solely to weak EMS business unit’s results.

This year Asustek’s goal is to become the world;s No.3 electronics-manufacturing service provider, after Hon Hai Group and Flextronics International.

The chairman of Asustek confessed that contract manufacturing operation is different from brand-name operation, stressing production scale and capacity, capital, vertical integration as well as management. He is reported to have said that after the separation the company’s contract-manufacturing operation will be free from the burden of confronting its brand-name operation.


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