Compal president denies Lenovo planning to buy stake in joint venture
Aaron Lee, Taipei; Adam Hwang, DIGITIMES [Thursday 16 January 2014]
Taiwan-based supply chain makers have claimed that Lenovo plans to acquire Compal Electronics’ 49% stake in their joint venture LCFC (Hefei) Electronics Technology. But Compal president Ray Chen denied the rumors at a corporate event on January 16.

However, Chen said that Compal is willing to negotiate an acquisition price.

LCFC mainly undertakes OEM production of notebooks and all-in-one PCs, and started production at the end of 2012. LCFC’s monthly capacity for notebooks began at 300,000-500,000 units in early 2013 and has increased to one million units currently. Further expansion to 1.5 million units is scheduled for the fourth quarter of 2014, Chen said. Currently, LCFC ships 600,000-700,000 notebooks a month, Chen noted.

According to the joint venture agreement, Compal has a put option to sell LCFC shares while Lenovo has a call option to buy the shares. The total transaction price cannot exceed US$750 million, much higher than Compal’s initial investment of NT$1.489 billion (US$49.6 million). The agreement does not specify any time limit for a sale.

According to industry sources, Lenovo has shifted production of high-end and business-use notebooks from ODMs to LCFC in line with its policy of increasing in-house production. Since LCFC’s notebook production capacity and yield rates have not yet hit targets, it is impractical for Lenovo to take over solely ownership of LCFC, the sources pointed out.

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