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April 11, 2006 5:45 am

BenQ sells optical storage unit to Lite-On IT

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BenQ said on Monday it would sell its optical storage manufacturing operations to Lite-On IT, Taiwan’s largest optical storage equipment maker.

The cash-and-share deal worth about US$200m is the second acquisition involving large Taiwanese downstream electronics companies in just four days.

It follows the announcement on Friday that AU Optronics, Taiwan’s largest flat-panel maker, will take over its smaller rival Quanta Display, helping it catch up with Korean rivals LG Philips and Samsung.

Taiwanese companies dominate many segments of the global electronics sector with their collective market share reaching more than 70 per cent in products such as notebooks and motherboards. But the island’s industry has suffered amid falling margins and fierce competition in contract manufacturing.

A first wave of consolidation started in the late 1990s when the overly diversified Acer Group split into Acer and BenQ. It then took its contract manufacturing operations public and sold off its remaining assets.

The fast rise of Hon Hai, the world’s largest electronics manufacturing services company, resulted in a series of smaller acquisitions.

Analysts said the two most recent deals were likely to trigger more consolidation involving prominent companies.

“These deals show that there will be a few groups, like Quanta and Lite-On, that remain committed to contract manufacturing, while others will re-focus,” said Jeff Lin, analyst at Daiwa Securities SMBC Cathay.

With the disk-drive sale, BenQ has retreated from its last pure component manufacturing business. BenQ makes computer, communications and consumer electronics products, while Lite-On makes CD-ROM, DVD, CD-RW and Combo drives.

The optical disk-drive deal announced yesterday raises Lite-On’s global market share in this segment to 27 per cent.

Lite-On will pay T$1.2bn (US$37m) in cash, and BenQ will take a 13 per cent stake in Lite-On IT after the group issues new shares, Lite-On said.

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