Top motherboard makers team to boost prices

Users could see the end of rapid price declines for desktop motherboards and graphics cards as two of the world’s largest motherboard makers announced plans to build a new company to combine production.

Asustek Computer Inc., the world’s biggest maker of computer motherboards, the main circuit board inside a PC that connects all of its components and peripherals, will take over the production of brand name motherboards and graphics cards for Giga-byte Technology Co. Ltd. The two Taiwanese companies said the deal will enable them to reduce raw materials costs since they’ll be able to buy components in bulk.

The new company is expected to start operations in January of next year.

Users could see the end of rapid price declines for desktop motherboards and graphics cards as a result of the deal.

Despite lower raw material costs, the two companies will hold more market share and work more closely together. That’s a big difference from the past, when motherboard makers launched massive price wars against each other in order to gain market share. The price wars often cut into company profit margins, giving users bargain prices.

“We expect the industry to benefit from less intensified price competition, which should improve motherboard makers’ revenues and earnings quality,” said Henry King, executive director of technology research for Goldman Sachs (Asia) LLC., in Taipei, in a report.

Rumors Giga-byte may be bought by a rival company have been rampant in Taiwan recently. The PC motherboard industry has matured, and many analysts expect some companies to be takeover targets in the near future.

Vincent Chen, an analyst at CLSA Asia-Pacific Markets, said Asustek leads the branded PC motherboard market with a 33 percent share, and the joint venture with Giga-byte adds 13 percent, raising their combined market share to 46 percent. With a dominant position in the market, they should be able to stabilize prices, he said.

In a statement, Asustek and Giga-byte said they would invest a total of NT$8 billion (US$243.7 million) in the new company. Giga-byte will own 51 percent of the joint venture, while Asustek will own the remaining portion.

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