THT Research: Recent Mergers and Acquisitions Changing the OEM/ODM Landscape.

CHICAGO -- The recent flurry of merger and acquisition activity is changing the IT contract manufacturing (OEM / ODM) landscape, according to THT Research (http://www.thtresearch.com). THT Research tracks M&A developments among IT players through its Contract Manufacturing Database. Updated weekly, the database contains information on over 6,603 M&A deals.

"We're in a period of consolidation in many sectors of the industry," comments THT analyst Susan Myers. "Buyers are increasing their purchasing power and suppliers are expanding production volume, product lines, and negotiating power."

Some high profile recent acquisitions include:

--Lenovo's purchase of IBM's PC business

--Gateway's acquisition of eMachine, which doubled Gateway's notebook computer purchasing power

--Cameo's merger with WLAN maker Global Sun

--Thermal solutions providers Asia Vital Components (AVC) & Datech Technology merger

--Winbond's acquisition of National Semiconductor Israel

--Merger of ASE (Chung-Li) and ASE Material with parent company ASE

--Sony's acquisition of CMO's Japan subsidiary, IDTech, ensuring a steady supply of LCD panels

--Merger of Konica and Minolta, strengthening their ability to compete in the digital camera business.

"Manufacturers often see M&A as the fastest way to expand market share," explains Myers. "For example, in recent days, Teapo Electronic merged with Luxon Electronics and acquired 51% of Luminous Town Electric, making the group the largest aluminum electrolytic capacitors vendor in Taiwan."

"Other manufacturers, such as Hon Hai, rely on acquisitions to enter new businesses," says Myers. "Hon Hai acquired Chi Mei Communication Systems in order to move toward becoming a major mobile phone ODM. That followed Hon Hai's purchase of a Motorola Mexico plant (including a four year contract to produce Motorola phones), Nokia's Finland handset casing facility, and Finland-based handset component maker Eimo (Hon Hai now supplies Nokia with handset modules and assembles Nokia phones)."

"Similarly, Hon Hai's acquisition of Ambit Microsystems made it one of the biggest global cable modem and WLAN suppliers; its acquisition of Antec Electric System Co., Ltd. moved it towards its goal of becoming a major supplier in the booming car-use IT parts and components business."

"Hon Hai recognizes that expanding increases its negotiating power with customers," says Myers. "While Hon Hai's own-brand products often compete with its OEM customers, customers can't easily abandon Hon Hai because of their vast and deep purchasing relationships with Hon Hai and its invested companies."

"Other ODMs are equally cognizant of the need to expand and many choose, like Hon Hai, to do so through acquisitions," says Myers. "For example, Asustek is considering acquiring WLAN maker GemTek, Asustek and Quanta have followed Hon Hai in opening units to provide products for the automotive industry, and UMC has acquired an auto parts company."

"Until recently, ODMs' main strategy for combating the OEM price-squeeze and falling margins was to expand production volume. Today, M&A seems to be a new weapon in the ODM arsenal and the relationships between OEMs and ODMs increasingly look like a meeting of Goliaths," summarizes Myers.

About THT Research

THT Research is a leading provider of research on information technology contract manufacturing. THT's online Contract Manufacturing Database covers 5,443 contract manufacturing records, 12,795 company profiles, 2,632 product lines, 189 brand names, 557 China activities, 522 financial notes, and 6,603 M&A deals. Full, ongoing access to THT's database may be purchased, as well as access to company or sector-specific segments. THT's research teams in Asia and the US also provide custom research. Visit www.thtresearch.com and sign up for THT's free weekly e-newsletter to get the latest contract manufacturing news to your desktop.