Hon Hai rumored to reach compromise with Tyco on patent infringement suit

Taipei, March 7, 2003 (CENS)--Taiwan's Hon Hai Precision Industry Co. has reportedly reached a compromise with the U.S.-based Tyco Co. over alleged infringement of its patented connectors, though Hon Hai has not confirmed the rumor.

Hon Hai filed a suit against the U.S. company at the end of 2001, claiming that the connectors made at Tyco's plants in Taiwan and Bermuda are copies of its patented Socket 478 electric connectors. The defendants in the suit included Tyco's branches in Taiwan and Bermuda as well as Mercuries & Associates Ltd., Tyco's sales agent in Taiwan.

Hon Hai estimated it losses from the infringement at NT$1.47 billion (US$42.48 million at US$1:NT$34.6) over the last three years. The figure balloons to more than NT$10 billion (US$289 million), if losses on related products are included.

Hon Hai and Tyco are two of the world's leading manufacturers of connectors. Since Hon Hai has recently expanded into the manufacture of computer motherboards, some domestic motherboard makers have decided to reduce purchases of connectors from the company and source the products from other suppliers, including Tyco. Several top-tier motherboard makers in Taiwan, including Elitegroup Computer Systems Co., currently purchase connectors from Tyco.

There is concern that if Tyco loses the case with Hon Hai, the company will have difficulty supplying enough connectors to its customers. An industry analyst said if the suit is settled, Hon Hai will strengthen its position in the connector field.

Some domestic connector manufacturers, including Asustek Computer Inc., Wistron Corp., Mitac International Corp. and Elitegroup Computer, have set up production and research facilities in mainland China to strengthen their competitive edge over Hon Hai.

Wistron, Acer Group and Aopen Inc. set up a joint-venture company in Guangdong province in December 2001, which has begun mass production in April last year. Asustek has a connector plant in Suzhou, Zhejiang province.

Asustek, Wistron, Mitac, and Elitegroup are authorized to use Tyco-certified technology to make connectors.