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June 25, 2017

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Compal open to Lenovo's bid for a joint venture

TAIPEI, Taiwan -- After the world's largest personal computer brand Lenovo was reported to fully control a joint venture in China with Compal Electronics (仁寶電腦), Compal said it keeps an open attitude toward any possibility.

Taiwan-based media have recently claimed that Lenovo plans to acquire Compal Electronics' 49-percent stake in their joint venture LCFC (Hefei) Electronics Technology.

Compal President Ray Chen (陳瑞聰) responded at the corporation's year-end celebration event on Jan. 16, saying that Compal is willing to negotiate an acquisition price.

However, since LCFC's notebook production capacity and yield rates have not yet hit targets, it is impractical for Lenovo to take over sole ownership of LCFC, Ray Chen stressed.

LCFC mainly undertakes original equipment manufacturing (OEM) production of notebooks and all-in-one PCs, and started production at the end of 2012. LCFC's monthly capacity for notebooks began at 300,000-500,000 units in early 2013 and has increased to one million units currently. Further expansion to 1.5 million units is scheduled for the fourth quarter of 2014, Chen said. Currently, LCFC ships 600,000-700,000 notebooks a month, according to Chen.

According to the joint venture agreement, Compal has a put option to sell LCFC shares while Lenovo has a call option to buy the shares. The total transaction price cannot exceed US$750 million, much higher than Compal's initial investment of NT$1.489 billion. The agreement does not specify any time limit for a sale.

Taiwan-based Digitimes Research earlier cited unknown sources to report that Lenovo has shifted production of high-end and business-use notebooks from original design manufacturers (ODMs) to LCFC in line with its policy of increasing in-house production.

Smartphones and Tablets to Take Up 20 percent of Revenue in 2014

Looking ahead, Compal expects its revenue proportion for notebooks and servers to drop from 83 percent in 2013 to 70 percent in 2014, for smartphones and tablets to rise from 9 percent to 20 percent, and for LCD TVs and networking & communication devices from 8 percent to 10 percent, Chen indicated.

In order to meet growing orders for smartphones and tablets, Compal is remodeling one of its five notebook factories in Kunshan, eastern China, Chen noted to Taiwanese local media.

The proportion of touch-enabled notebooks will only rise from 12-13 percent at the end of 2013 to 15-20 percent in 2014 because business-use models will be the source of the year's growth in total notebook demand, and the majority of these models do not need touch support, Chen pointed out.

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