Asustek Reportedly Denies MicroStar International Acquisition Plans

Asus Has No Plans to Acquire MSI, But Something May Be Ongoing Between the Two

by Anton Shilov
11/28/2006 | 04:39 PM

Asustek Computer has reportedly denied intention to acquire one if its rivals, MicroStar International. Earlier this year Asustek was rumoured to merge with Gigabyte Technology in an attempt to increase its competitive positions on the market, but at the end, Asus and Gigabyte have formed a joint venture called Gigabyte United.

No Merge Between Asus and MSI. At Least So Far…

 

The rumours about possible merge of MSI and Asustek broke out in Taiwan late last week after unofficial information about an intention of Washington-based private equity fund to invest up to $6.4 billion into a large Taiwanese electronics company emerged. Chinese-language Economic Daily News news-paper is reported to have quoted Asustek representatives saying that the acquisition of MSI was “absolutely impossible”, claims DigiTimes web-site.

Just like Asustek Computer, MicroStar International has strong brand presence in various market segments, including mainboards, graphics cards, notebooks, communications and so on.

The Big Four Against Foxconn

Earlier this year, when rumours emerged that Asustek planned to acquire Gigabyte, the company’s representatives also denied any possibilities of the merge. However, both companies eventually agreed to form a joint venture called Gigabyte United that is controlled by Gigabyte (which owns 51% of shares).

Asustek, just like the other companies from the so-called Big Four – ECS, Gigabyte and MSI – competes fiercely with Foxconn, a company originally involved in contract manufacturing for several large companies only, but who has been penetrating the channel markets for two years now. Gigabyte’s Tim Handley – regional marketing manager in Pan Asia and Pan Africa – recently admitted in an interview with DQchannels web-site that Foxconn had proposed to acquire the firm, but the company has managed to avoid the take-over.

“The reason was simple. Like most Taiwanese companies, Foxconn business model was to simply manufacture motherboards in bulk to enjoy economies of scale. It did not have any need to market its brand or create its brand identity. But China has emerged as the mass producer for the world and this put Foxconn in a fix. It did not have a channel or go-to-market strategy,” Mr. Handley said.

Foxconn is currently the world’s leading contract manufacturer of various electronics equipment, however, there are still many lucrative market that the company has not been able to penetrate so far itself and a logical move for the firm would be to tap the new markets with acquisitions. Given that Gigabyte has quite loyal channel customer base, it could be an interesting target for Foxconn, just like MSI.

“So before Foxconn could take us over, Gigabyte decided to merge forces with Asustek and consolidate its position. Plus, Asus was competing with Foxconn on the OEM level. Therefore, this joining of forces has made Gigabyte stronger as a company. Also, we can now make cheaper motherboards, without compromising on the quality,” said Mr. Handley.

Given that both Asus and Gigabyte rival not only Foxconn, but also MSI and ECS, it may be crucial for the latter two companies to put even more efforts into creating more and more competitive products or team up with other leading players to avoid take over by larger players.