TAIPEI – Two of Taiwan’s largest contract electronics manufacturers have denied reports they were in talks over a tie-up or buy-out, but investors sent their stocks higher on the speculation anyway.

Taiwan’s Economic Daily News reported that Hon Hai Precision Industry, which assembles products ranging from Apple iPhones to Sony PlayStation 3 game machines, has been in talks to buy Pegatron, Asustek’s contract manufacturing arm, in a stock swap.

The contract electronics manufacturing industry has been one of the key elements of low-cost digital gear for the past several years. Consolidation could mean higher prices overall since currently, there are a lot of electronics manufacturers for vendors to choose from, so vendors have all the pricing power.

Asustek split itself into three companies early this year in a bid to separate its contract manufacturing business from its branded business. The local newspaper quoted analysts talking about a possible deal between the companies, but quoted Hon Hai as declining to comment and Asustek simply giving information about future plans that have already been decided for Pegatron, none of which include Hon Hai.

Later on Tuesday, Asustek released a statement to the Taiwan Stock Exchange saying neither Asustek nor Pegatron have engaged in any talks regarding a stock swap with anyone. A Hon Hai representative said his company has denied the report.

Analysts believe a deal between Hon Hai and Asustek for Pegatron would boost Hon Hai’s laptop PC manufacturing business. The report, though denied by both parties during market hours, sent the stocks of both companies up. Hon Hai gained 1.9 percent to end trade at NT$132, while Asustek stock rose 0.6 percent to end the day at NT$67.2.



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