Well, we have heard the news. Asus works together with Gigabyte to build a new company. On 2007, they will produce motherboard and graphics card with Gigabyte’s brand. What makes this thing so interesting?
It’s unlikely to see Tom and Jerry to sit together, right? Or, perhaps you will be surprised if you see Tweety and Sylvester eat on the same table. But in business, two enemies may sit together to fight against bigger enemy. This is the real example based on my own analysis. Most of my analysis are based on the rumors, so the truth should be accepted as-is.
Asus is a big brand. I don’t remember their assets precisely, but they are big. Gigabyte is simply smaller than Asus. Why Asus want to work together with Gigabyte and finally produce the new mobos and vgas with Gigabyte’s brand? It’s very strange. I can understand if a big company buy a smaller company and integrates the smaller company in to the bigger one. But rarely happens, if bigger company buy the smaller company (which is their direct competitor), and then support them to grow up. There will be a big conflict of interest for sure. Asus produces mobos and vgas and so does Gigabyte.
Behind the cover: The truth remains uncleared
Some rumors say that the new joint venture company will be owned 51% by Gigabyte and 49% by Asus. So, does it mean that Asus brand will be eliminated? How come, as I’ve told you, Asus is much bigger than Gigabyte. You can’t expect a mice to eat an elephant, right? (I think an elephant is too big, let’s replace the elephant with cat to make more feasible analogy ;))
The other (more make sense but I can say the source) rumors say that Asus bought Gigabyte’s mobos and vgas division. Asus bought 49% of Gigabyte’s share in mobos and vgas division(and the 51% still goes to Gigabyte). This co-operation will allow Gigabyte to use Asus factories/plants to produce mobos and vgas. Of course still with Gigabyte’s own brand. Asus himself still has their 100% share of their own company. They didn’t sell their shares, but they bought Gigabyte’s shares.
It remains uncleared whether Asus will lay off their mobos and vgas. The conflict of interest should be raised here. But, I don’t think Asus will stop producing their mobos and vgas. They have too good image on these fields. I don’t think they will let it go to Gigabytes. My prediction says that this co-operation will just allow Gigabyte to use extra capacity of Asus’ plants. Still, Asus will have their own brand and Gigabyte will have their own.
If this is only about factory and production shares, why they decide to join together?
It’s caused by one name, Foxconn. Foxconn is a very big company. Have you ever opened your iPod, your iPaq, or others PDA? Or perhaps you ever see Foxconn tag inside your peripherals? Yes, you are not dreaming. Foxconn is a big company, but they usually play behind the screen. They produce connectors, cooling fan, PCB, socket, etc. They build by demand.
But now, Foxconn decide to grow up and build their own mobos and vgas. Of course they still serve demand from big vendor to produce components, but when the time comes to produce their own mobo/vgas, Foxconn’s mobos/vgas price should be lower. So, Foxconn is predicted to sell affordable mobos/vgas with premium quality. No one should doubt the lowest price of big company like Foxconn and they also have enough experience to build good product (you never doubt your iPod’s, iPaq’s, etc quality, right?). Good product at affordable value is simply a disaster for a top class company like Asus (which I believe has a big profit margin for their products).
The rumors also spread out that Foxconn is interested to buy Gigabyte. Well-well-well, Gigabyte+Foxconn is a big threat for other big companies (Asus was one of them). Finally, (I guess) Asus has done a perfect manuver to grab Gigabyte’s heart. Of course Gigabyte will have a big bargain because they are wanted by two big companies (Asus and Foxconn). So the bargain goes to Asus, and Asus has to let Gigabyte to use their plants to produce mobos/vgas with Gigabyte’s brand. If Asus deny this scenario, perhaps Gigabyte will not join Asus 😉
If Gigabyte doesn’t accept Asus’ offering, perhaps Gigabyte will be bought by Foxconn. This scenario will be ended up with elimination of Gigabyte and the new brand should be Foxconn. Of course Gigabyte doesn’t want this and luckily Asus accepts their bargain (Gigabyte is still alive and they can use Asus’ plants).
Asus+Gigabyte means bigger company and bigger market share. Despite of who buys who or who ownes who, they both are considered as one brand with joined market share. Foxconn has to do their homework to fight against this. Not an easy homework man… but you have all the potential to fight GigaAsus, AsusByte, or whatsoever 😉