Sampo Teams Up With UMC, Tatung to Sharpen Competition Edge

Taipei, Oct. 17, 2005 (CENS)--Sampo Group has recently entered into alliances with United Microelectronics Corp. (UMC) and Tatung Corp. in hope of boosting its competitiveness in world household-appliance market.

To ally with UMC, Sampo has allocated a seat at affiliate Rechi Precision Co., Ltd.'s director board to the silicon-foundry giant. In return, UMC has begun offering control chips for frequency converters to Rechi, at which it holds an 8% stake. The converters are a crucial component in refrigerators and air conditioners.

Sampo-Tatung partnership formed in a pledge at a recent meeting that the two companies will procure each other's products and make products for each other. Sampo will begin to buy refrigerator compressors from Tatung in exchange for Tatung's orders for its air-conditioner compressors next year at the earliest.

Taiwan's industry insiders point out that Sampo took the alliance steps in a bid to climb out of gloomy operation. They say UMC bought into Rechi shortly before the compressor manufacturer was ordered by the Taiwan Stock Exchange Corp. to stop selling its stocks on the market. Though, Rechi's executives have stressed that UMC invested in their company because it is optimistic about their company's future in world compressor market.

People familiar with the UMC's investment case point out that UMC expects frequency-conversion air conditioners to become a star product soon along with global warming exacerbating. The chipmaker has begun for the first time offering control chips for frequency converters.

Rechi plans to make its frequency-conversion compressors for air conditioners available on the market in the first quarter next year. The company's machines are expected to be more competitive than Japanese models with UMC's less-expensive chips. UMC may make chips for more household appliances including washing machines and refrigerators as soon as its air-conditioner chips make success.

Rechi's executives point out that the mainland Chinese customers are the company's major profit contributors. In the mainland, the company's customers now include household-appliance heavyweights Haier and TCL. Rechi plans to expand its factory in Shandong Province to put out two million air-conditioner compressors for Haier, making it the world's No. 1 supplier of the compressors. However, the investment plan has yet to be approved by Taiwan's government.