Contract Manufacturing | 北投, 1 January 2008 — ASUS Puts the Factory in a Different Company

The photograph was taken on 15 March 2008, on a street in the 關渡平原工業區 in 北投. A plain concrete block, four storeys, strip windows, power lines across the frame.

On the parapet, new: PEGATRON in white capitals, and 和碩聯合科技 beside it.

The sign was about ten weeks old. The building was not.

In July 2007 ASUS told the Taiwan Stock Exchange that it would separate its brand from its manufacturing, with effect from 1 January 2008.

The contract work went into two wholly owned subsidiaries. 和碩聯合科技, Pegatron, took the computer manufacturing.

永碩聯合國際, Unihan, took casings, moulds and the non-computer work.

Of the parent's roughly NT$140 billion in assets, about NT$70 billion went to Pegatron and NT$12 billion to Unihan.

施崇棠 stayed as chairman of ASUS. 童子賢, then vice-chairman and one of the four engineers who had left Acer to start ASUS in 1989, took the chair of both new companies.

The reason was the oldest problem in this industry. A company that sells its own laptops and also builds laptops for other brands is asking its customers to hand their designs to a competitor.

Acer had run the same separation at the start of the decade. ASUS was following a rule, not inventing one.

The 2008 split did not settle it, because both subsidiaries were still owned outright by ASUS, which meant the competitor still owned the factory.

In December 2009 ASUS announced the real separation. On a base date of 1 June 2010 it distributed three quarters of its Pegatron holding to shareholders, at 150 ASUS shares and 404 Pegatron shares per thousand held.

The market did not like it. ASUS shares closed limit-down two days running.

It worked anyway. Freed from its parent, Pegatron took work no ASUS-owned supplier could have taken, and became the second assembler of iPhones after Foxconn.

The Shanghai plant ASUS had built in 浦東 in 2004 went across with it and turned into one of the largest of those sites.

What stands in 北投 is an industrial district on the Guandu plain, quiet, low, unremarkable, with company names on parapets. These are working offices and plants with no visitor access; the street is the whole of it.

The photograph shows one Pegatron building among several in the district, not the registered head office specifically.

Photo: Charles Windlin, CC BY 2.0, via Wikimedia Commons.