Legend, Taiwan's Gigabyte in $250M tie-up
By CNN's Kristie Lu Stout
HONG KONG, China (CN) -- China's Legend Holdings and Taiwan's Gigabyte Technologies inked a $250 million deal to jointly develop a mainland-based motherboard business.
Under the agreement, Legend and Gigabyte will each hold 50 percent equity and inject their motherboard factories in Huiyang and Dongguan respectively into the joint venture.
The cross-strait alliance also marks progress in business relations between the China and Taiwan, which Beijing has long regarded as a renegade province.
A common target
"Legend and Gigabyte share a common development target, both determined to base in the PRC to develop large-scale manufacturing business," said Legend President and CEO Yang Yuangqing.
"We are confident that the joint venture will develop into one of the largest contract manufacturing corporations in the world," the Legend CEO added.
The new venture will initially build motherboards for Legend and Gigabyte, but will eventually develop a global customer base.
A motherboard houses the key components of a personal computer, including the microprocessor, memory chips, as well as sound and graphics cards.
According to the two companies, the venture will have an initial output capacity of 9 million motherboards a year.
Gigabyte chairman Dandy Yeh told reporters that the venture expects to achieve 15 percent global motherboard market share.
The Taiwan firm is one of the largest motherboard makers in the world, with manufacturing plants in China and Taiwan.
In 2000, Gigabyte claimed 8.6 percent market share in the worldwide motherboard market, with total sales reaching 9.8 million units.
Another Legend spin-off
Better known as China's leading PC brand, Legend started its motherboard business in 1990.
Legend sold over 3.6 million motherboards during the 2000/01 financial year.
Analysts say the tie-up is Legend's attempt to further streamline its business after the recent spin-off of its distribution arm Digital China.
"As a PC original equipment manufacturer, does Legend really need a motherboard business? They don't need motherboard operations," Nomura analyst Theodore Teo told CNN.
"There really isn't much to the whole JV from a financial point of view," Teo added.
"But from a strategic point of view, it's a step towards what they wanted to do earlier -- cut out the motherboard business as a whole."
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