Compal to buy Toshiba LCD TV plant in Mexico

Compal Electronics Inc (仁寶), the world’s second-largest contract manufacturer of laptop PCs, yesterday announced that it was purchasing Toshiba Corp’s LCD TV manufacturing plant in Mexico as part of its efforts to boost LCD TV production.

The Taiwanese maker said in a statement that it has entered into a contract to acquire Toshiba Electromex SA de CV, which is located in Ciudad Juarez, Mexico.

The statement did not disclose investment figures except to say the deal was expected to be completed by September, pending regulatory approval.

The deal is expected to help Compal secure stable orders from Toshiba, which is one of Compal’s major TV customers.

Brand customers will sometimes sell their production facilities to contract manufacturers as a means to save costs and outsource future orders.

Through the purchase, contract manufacturers hope to ensure stable orders from these clients and at the same time expand production facilities.

For instance, Hon Hai Group (鴻海集團) spent NT$100 million (US$3 million) in 2005 to acquire assets of two of Hewlett-Packard Co’s manufacturing facilities, one each in Australia and India.

In 2008, Hon Hai invested US$18 million to buy a cellphone manufacturing plant in Mexico from Motorola Inc.

“By acquiring Toshiba Electromex, Compal looks forward to expanding LCD TV manufacturing flexibility, diversified sales mix, and revenue growth momentum in the future,” the statement said.

Compal president Ray Chen (陳瑞聰) said at the Computex technology trade fair in Taipei early last month that the company was setting its sights on “four screens” to fuel future growth momentum.

These four screens are notebooks, tablet PCs, TVs and smartphones.

The company expects to produce 8 million LCD TVs this year, up from last year’s 5.4 million, he said.

Shares of Compal closed down 1.5 percent to NT$33.5 on the Taiwan Stock Exchange yesterday.