Gigabyte, Asus forms JV

MUMBAI

AUGUST 10, 2006

Two fierce competitors in the motherboard business - Gigabyte Technologies
and Asustek Computers - have come together to pool each others' resources
according to a press release which states that it will "create a win-win
situation" for shareholders, employees and customers of both companies. The
two companies announced that a joint venture will be formed to produce
"Gigabyte" branded motherboard 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
US$ 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 seats of directors and one supervisor, and
AsusTek appointing two directors and one supervisor.

While further details of this JV will be worked out later this year, market
is still not clear on the impact of the this JV in India. Reacting to this news
Prabodh Vyas, Managing Director, 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, who heads the Indian operation of Asus India, was not available
for comments.

Without going in to details of the JV, Prabodh said, "The alliance will
leverage both companies' economies of scale, research and development, and
diverse product lines to achieve greater synergy."

According feedback from market the joint ventures 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 manufacture were faced by low margin
pressure, and to overcome this pressure, the big ones 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, Elitegroup
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. Apart from increased efficiency, Gigabyte will have greater resources
to expand their diversified 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.