Asustek sets up subsidiary for new notebook factory

Asustek Computer on April 18 announced that it decided to invest NT$3.5 billion to set up a wholly-owned subsidiary, Asusalpha Computer, to operate the Chungli, Taoyuan County notebook factory it recently acquired from Elitegroup Computer Systems (ECS).Though a 100%-owned subsidiary, Asusalpha will be independent of its parent company in operations, Asustek vice chairman T.H. Tung said, and its revenues will not be incorporated into Asustek’s combined sales.Asustek’s combined revenues count orders landed through its Taiwan headquarters and its China holding company. As a result, Tung was asked whether Asusalpha’s independent revenue report suggested that the new subsidiary will obtain orders itself, to which Tung responded that Asustek is still evaluating the business model.Regarding Asustek’s decision to establish an independent subsidiary for a newly-purchased plant, some industry observers believed the company’s reasons may include the distinctive operating and financing systems the Chungli factory adopts for its contract production business for Apple Computer, an OEM-oriented model that is different from Asustek’s own-brand production model in its Taiwan factories and the low profit margin the Chungli plant may bring to the company.The margin for Apple products is estimated at 4-5% only. If the Chungli facility were to stay in the group and continue to focus on OEM production, its business would be expected to greatly drag down Asustek’s profit margin, industry observers added.Asustek will pay NT$680 million for the factory and NT$300 million for production equipment. The assets will be formally transferred on June 30. At the same time, Asustek will also announce the value of the material stock it will purchase from ECS. When the two companies unveiled the deal at the end of March, ECS had more than NT$2 billion worth of materials at the factory.Source: DigiTimes