Two leading information-technology (IT) conglomerates in Taiwan—the Mitac Group and the Hon Hai Group--recently announced plans to jump into the auto-parts business. A group of smaller firms is expected to follow suit.

Mitac will cooperate with Honda (Guangzhou) Motor Co., a joint venture between Honda Motor of Japan and Guangzhou Automobile Group Corp. of China. Hon Hai hopes to make a series of acquisitions to speed up its entry into this new field.

This diversification, industry sources say, has been prompted by a slowdown in the growth of the global PC market in recent years. This forces PC-related manufacturers to look elsewhere for expansion.

Mitac chairman Mathew Miao says he noticed the strong potential of the auto-parts industry a few years back, and his group has quietly become involved in related businesses. One of its subsidiaries, Mitac Precision Technology Corp., has recruited a team of auto-parts professionals and is building a factory in Shunde, Guangdong Province.

Mitac Precision has reportedly signed an agreement for the supply of auto parts to Honda Guangzhou on an original-equipment (OE) basis.

Hon Hai, the world's largest maker of barebone PCs, connectors, and game consoles, has included auto parts in its "6C project." The 6Cs are "computers, communications, consumer electronics, channel, car, and content." To get into the "car" segment, the company plans to invest in a number of related small- and medium-sized enterprises in Taiwan, and simultaneously to begin acting in Japan and the United States.

Hon Hai has set up a resource-swapping platform for its expected acquisitions. It also plans to develop an auto parts production zone on a 3,000-hectare "campus" in Shanxi Province of mainland China. Its magnesium alloy business division has already won QS-9000 certification, qualifying it to act as an international OE supplier.

Auto parts is just one of the fields into which IT manufacturers have been diversifying in recent years in an effort to assure revenue growth and business expansion in the face of expected slow growth in the market for Digital Home and liquid crystal display (LCD) TV products. The auto-parts industry, by contrast, offers lucrative business opportunities, especially at a time when automobiles are being equipped with an increasing array of electronics and computer parts.

In explaining the Hon Hai Group's decision to move into auto parts, group chairman Terry Gou says that "the car of the future will be similar to a computer, and this will offer many business opportunities to electronic and IT makers."

Among the other IT manufacturers in Taiwan that have been developing their auto-parts businesses are Compal Group (IC design), Universal Scientific Industry Co. (motherboards, PCs, etc.), BenQ Corp. (PCs and peripherals), and a number of light-emitting diode (LED) companies.

One industry insider predicts that auto parts will become one of the biggest sources of revenue growth for Taiwan's IT manufacturers over the next few years.