Taipei, March 23, 2007 (CENS)--Due to vehement opposition of clients and suppliers, the strategic alliance between ASUS and Gigabyte, two major Taiwanese motherboard makers, in setting up a joint venture, dubbed Gigabyte United, has fallen through, announced the two companies yesterday (March 22).

The announcement was made by Chang Wei-min, spokesman of ASUS and Liao Chi-li, spokesman of Gigabyte, at a press conference held in Taiwan Stock Exchange. As a result, Gigabyte United will become a 100% owned subsidiary of Gigabyte, responsible for selling Gigabyte motherboards and display cards.

Liao Chi-li reported that Gigabyte United doesn`t have any plan to find a new business partner for the moment, denying indirectly a rumor that Gigabyte may switch to the camp of Hong Hai Group, the second largest Taiwanese motherboard maker, trailing AUS.

In response to the announcement, share price of Gigabyte rose NT$0.7 closing at NT$23.1, while ASUS share price dipped NT$1.6 to NT$81.7 yesterday.

The breakup is another futile effort of ASUS to further expand its market share via strategic alliance or acquisition, following setback of Kingsus, ASUS`s subsidiary, in its offer to acquire Flexium Interconnect. ASUS motherboard output is expected to hit 68 million pieces this year, which together with Gigabyte`s 16 million pieces would allow ASUS to control 80% of the global market, far exceeding Hong Hai`s projected motherboard output of 40 million pieces.

News about the breakup has actually in circulation in the market for a while, triggered by the protracted delay of ASUS to remit NT$4 billion of its share in the NT$8 billion capital of Gigabyte United, which started to operate on January 1, 2007.

Liao Chi-li pointed out that since establishment of the joint venture last December, clients and suppliers have expressed serious concern, while Gigabyte employees have also been haunted by the rumor that the company would eventually be acquired by ASUS. To uphold its brand independence, Gigabyte finally obtained agreement of ASUS to shelve the alliance.

The alliance was originally designed to alleviate the acute price competition in the global motherboard market. However, following the establishment of Gigabyte United, Taiwanese and European channel players have expressed serious concern over Gigabyte` product development, sales, conflict with ASUS brand, and profit potential, a problem which has been complicated by its internal opposition. In addition, European Union has also been reported to doubt the alliance`s possible violation of the anti-trust regulation.

(by Philip Liu)