“Asus will continue to compete with Gigabyte United”

By Vinita Bhatia - 24 November, 2006

MUMBAI
NOVEMBER 23, 2006

When Gigabyte announced its plans to bring Asustek Computers into its fold, there was a flurry of questions. Initially the two companies announced that a joint venture would be formed to produce Gigabyte branded motherboards and graphics cards. But this still left a lot of questions unanswered, especially pertaining to what would happen to Asus' motherboards.

Now a clearer picture has emerged. And that is in the form of Gigabyte United, a division of Gigabyte International, which will concentrate entirely on manufacturing motherboards and cards. While Asus will continue to function as a separate entity and will still be a competitor for Gigabyte United.

That is the message Tim Handley, Regional Marketing Manager - Pan Asia and Pan Africa, Gigabyte United is disseminating on his one-day trip to India. “We don't share our technology with Asus. So, Asus will still be our competitor,” he noted.

But would it not make more sense to simply assimilate Asus into the Gigabyte brand? Not, according to Handley. Firstly, because Asus has a different and distinct brand identity. “Also, Gigabyte has technological agreements with vendors like AMD and Intel. For instance, we are six weeks ahead for Dual Core motherboards. If we merge with Asus then that relationship will be lost,” Handley clarifies.

Working in favor of Gigabyte is also the fact that the channel and customers perceive that Gigabyte has takenover Asus. This way, its position has been strengthened further among the channel community.

Handley also points out that Asus has strong relationship with OEMs and sells largely to them. On the other hand, 80 percent of Gigabyte's business comes from its channel. By keeping the two companies separate, Gigabyte can ensure that it continues to meet the needs of two distinct set of customers without losing out to an external competitor like Foxconn.

Interestingly, for the past two years, Foxconn was trying to buy Gigabyte. “The reason was simple. Like most Taiwanese companies, Foxconn business model was to simply manufacture motherboards in bulk to enjoy economies of scale. It did not have any need to market its brand or create its brand identity,” explains Handley.

But China has emerged as the mass producer for the world and this put Foxconn in a fix. It did not have a channel or go-to-market strategy. Also, Foxconn had OEM partnerships and did not sell to the end-customer.

On the other hand, Gigabyte had a dedicated and loyal channel, a robust branding strategy and sold to the end-users.

Therefore, Foxconn had been making overtures to take over Gigabyte as the best route to transform itself into a popular brand. There was not much else that Foxconn could have done to upgrade itself into an end-customer brand other than this.

“So before Foxconn could take us over, Gigabyte decided to merge forces with AsusTek Inc and consolidate its position. Plus, Asus was competing with Foxconn on the OEM level. Therefore, this joining of forces has made Gigabyte stronger as a company. Also, we can now make cheaper motherboards, without compromising on the quality,” said Handley.

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