Two fierce competitors in the motherboard business - Gigabyte Technologies and Asustek Computers - have decided to join forces to pool each others' resources according to a press release which states that it will 'create a win-win situation' for share-holders, employees and customers of both companies. The two companies announced that a joint venture would be formed to produce Gigabyte branded motherboards and graphics cards. It is still not clear what will happen to the Asus brand.

The joint venture, which is yet to be named, will have an initial capital of $244 million with Gigabyte holding 51 percent and Asustek holding 49 percent stakes. There will be five directors and two supervisors in this joint venture, with Gigabyte appointing three directors and one supervisor, and AsusTek appointing two directors and one supervisor.

PRABODH VYAS: Alliance will not affect Indian operations of both companies

While further details of this JV will be worked out later this year, the market is still not clear on the impact of the JV in India. Reacting to the news Prabodh Vyas, MD, Gigabyte Technology India said, "The two companies will continue businesses as usual. The alliance will not in any ways affect the Indian operations of both the companies."

Andrew Tsui, Head - Indian Operation, Asus India, was not available for comments. Without going into details of the JV, Vyas said, "The alliance will leverage both companies' economies of scale, research and development, and diverse product lines to achieve greater synergy."

As per feedback from the market, the joint venture is an attempt to fight competition from Foxconn, which is presently the world's largest manufacturer and fast becoming a preferred brand among customers. Until recently, most motherboard manufactures were faced with low margin pressure, and to overcome this pressure, the big manufacturers were trying to consolidate its operation by trying to takeover smaller manufacturers.

According to sources, there were attempts in the past by Foxconn to buy Gigabyte and MSI. While these did not work out, Gigabyte meanwhile took its archrival Asustek in its folds in order to counter competition from Foxconn. The joint venture will help build capacity and bring down production cost. This also means improved margins good enough to compete with Foxconn, Elite group Computer Systems (ECS) and Micro Star International (MSI).

Meanwhile, statements from both the company attribute its intention to form a JV on the improvement of operation efficiency for Gigabyte's motherboard 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.

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