Teco Ties Up With AUX Group

Taipei, Nov. 17, 2005 (CENS)--Teco Group, one of Taiwan's largest producers of electric machinery, will set up a joint venture with mainland China's AUX Group to operate a new plant of compressors for air conditioners in Ningbo of Zhejiang Province in an RMB200 million deal.

In the initial stage of its inauguration, the joint-venture plant will have an annual production capacity of three million compressors. In the foreseeable future, the annual production capacity will be raised to 10 million units to compete with Rechi Precision Industry Co. under the Taiwan-based Sampo Group, making the new plant squeeze into the list of the world's top-three compressor facilities.

Teco said the cooperation with AUX would help it trim production costs and acquire critical technologies for making price-competitive compressors. Teco estimated annual consumption in the mainland China amounts to 40 million up to 50 million air conditioners. Compressor accounts for 50% up to 60% of the total production costs for air conditioner.

The joint-venture firm is expected to begin mass production sometime in August and September next year. In the initial stage of its operations, products made by the firm will be supplied to AUX Group and Teco's air-conditioner plant in Nanchang of Jiangxi Province.

Teco said it would be able to sell parts and compressors for air conditioners back to Taiwan after the joint-venture plant expands production capacity to 10 million compressors per year.

In line with the massive investment project in the mainland, Teco will move all its production lines of compressors to the mainland sometime in the first half of next year. The company said its Taiwan operations will focus on assembling, testing, precision machinery processing, and electric engineering.

Faced with the competition from Teco, Rechi said it won't meet head-on competition with Teco as both sides have different customer bases. Rechi said its board of directors has recently passed a proposal to set up a plant in Qingdao of Shandong Province with an annual output of six million rotary-type and one million scroll-type compressors for air-conditioners.

Rechi noted it has set a production goal of over 10 million compressors for 2008, which will enable it to replace Matsushita Group of Japan and LG of South Korea as the world's largest producer of compressors for air conditioners.