Rumor: ASUS and Gigabyte start joint-venture [UPDATED]

If we can believe some industry insiders Hardware.Info just ran into, there will be a big shake-up in the market for mainboards. A strong rumor is going around that Gigabyte and ASUS will start a joint-venture for the production of motherboards. The new company will start on January 1st 2007 and will then be the biggest mainboard manufacturer in the world

The rumors state that Gigabyte will get a small majority of the shares (51%), and ASUS will get 49%. The cooperation between the two companies will not have any impact on their respective products. It is expected that both brands will carry on selling and marketing mainboards under their own brands, however the joint-venture will have big advantages for two companies when it comes to the acquisition of components used for the production of their boards.

Maurice Slaghekke, Commercial Manager Benelux & Nordics of Gigabyte would not comment on these rumors. We could not reach an ASUS representative at this point in time.

When we receive more information, we will update this newsitem accordingly.

Digitimes has posted some more details:

Asustek Computer and Gigabyte Technology, two Taiwan-based motherboard manufacturers, announced on August 8 the establishment of a joint venture to produce "Gigabyte" branded motherboard and graphics cards. The new company is scheduled to become operational on January 1, 2007, with details of the operations to be revealed later this year, including the company's name, according to the Asustek and Gigabyte at a press conference on August 8.

The Asustek-Gigabyte joint venture will be established with an initial capital of NT$8 billion (US$244 million), with 51% of the company being controlled by Gigabyte and 49% by Asustek. Under the agreement, the chairman of the joint venture will be appointed by Gigabyte, as well as three directors and one supervisor on the board of directors of the new company. The remaining two seats on the company's board will be assigned by Asustek, according to the companies.

Nick Geurds, Market Development Manager for ASUS Benelux, confirmed the story. The mainboard production factories of both companies will be placed in the newly formed joint-venture.The new company will produce ASUS as well as Gigabyte branded products. Both brands will stay in the market and it is expected that they will keep competing, although both parent companies will benefit from the economy of scale of the new joint-venture.

Update Augustus 9 2006

Today we recieved the following press release, that confirms yesterday's story:

In accordance with the relevant regulations according to Company Law, Securities Law and Business Merger & Acquisition Law, a resolution of the board of directors was passed on the 8th of August, 2006 for GIGABYTE Technology Co., LTD (Stock Code: 2376) to transfer the relevant assets and businesses of its own branded motherboards and VGA cards to a newly established subsidiary. After all the necessary legal procedures and obligations have been fulfilled, ASUSTek Computer Inc. (Stock Code: 2357) plans to invest in this newly established GIGABYTE subsidiary to help manage the joint venture and develop a strategic alliance with GIGABYTE. Both parties will work together to increase operation efficiency, enhance product quality, provide better customer service and create a higher value for shareholders.

The capital of this joint venture will be NT$ 8,000,000,000 (eight billion NT dollars). GIGABYTE Technology intends to hold 51% of the shares and ASUSTek will hold 49%. This joint venture plans to commence operating in January 2007. There will be five directors and two supervisors in this joint venture, with GIGABYTE appointing three seats of directors and one supervisor, and ASUSTek appointing two directors and one supervisor.

According to the Institute of Information Industry (MIC), the total value of motherboards produced in 2005 was US$8.9 billion, a growth rate of only 2.2% from year 2004. The total value of motherboards produced for the first half of 2006 has fallen to US$3.67 billion in comparison to the US$3.75 billion for the first half of 2005. In addition, the leading brand PC manufacturers have increasingly enlarged their market share, causing the market share for the motherboard channel to decline dramatically. In this slow developing market environment, GIGABYTE seeks to establish an alliance with ASUSTek in order to assist the operation efficiency of GIGABYTE's motherboard business. Apart from increased efficiency, GIGABYTE will have greater resources to expand their diversified business. 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. It is believed that this strategic alliance will create a win-win situation for shareholders, employees and customers of both companies.