Motherboard maker Asustek to split into three

A familiar name in computer motherboards, Asustek Computer, will split into three companies by January to separate its name brand product business from its contract manufacturing operations, it said Monday.

"We think this will boost our competitiveness in each area," said Jonney Shih, chairman of Asustek, at a news conference in Taipei.

The announcement comes after months of speculation over such a move and years after some rivals in Taiwan first undertook similar changes to avoid conflicts of interest with customers. A number of companies on the island produce IT hardware for huge overseas customers such as Hewlett-Packard, Sony Computer Entertainment, and Apple, in addition to their own-brand products.

Acer, the world's third-largest PC maker, was a pioneer in spinning off manufacturing operations in Taiwan. Several years ago the company divided itself in three, using the Acer name for its branded PC business, while spinning off its main contract manufacturing arm into a company called Wistron and its mobile phone and monitor business into BenQ. As part of the division, Wistron had to compete against other contract manufacturers for orders from Acer. Some people feared the contract manufacturing business might wither and die without the Acer orders, but instead Wistron has steamed ahead, capturing high profile business including Xbox 360 game console orders from Microsoft.

Asustek's name brand business will continue to operate under the same name, while its PC-related manufacturing operations will become Unihan Technology. Asustek's casing, modules, and non-PC contract manufacturing business will become Pegatron Technology.

Asustek sells goods ranging from motherboards and graphics cards to laptop PCs and smartphones under a few names, including its popular Asus brand. The company is also well-known for quality. When Sony Computer Entertainment went looking for a manufacturer for the PlayStation 3, it tapped Asustek to kick start production and then later added its old partner, Hon Hai Precision Industry Co.

The split will take place on January 1, 2008, Asustek said.

Pegatron will have the largest revenue of the three companies after the split. Revenue this year from the future Pegatron businesses should fall between NT$300 billion (US$9.14 billion) and NT$350 billion, while the future Asustek business is expected to account for NT$250 billion and what will become Unihan will see revenue of NT$150 billion, Asustek said. In total, the companies combined should post revenue as high as NT$800 billion this year, compared to NT$560 billion last year.

Asustek will remain listed on the Taiwan Stock Exchange, while the company did not rule out the possibility of overseas stock market listings for the two new companies.

The three-way split requires the approval of government regulators before it can be finalized.