Kontron AG and Ennoconn Corporation enter Strategic Partnership

Kontron AG, a leading global provider of Embedded Computer Technology (ECT), and Ennoconn Corporation, a subsidiary of Foxconn Technology Group in Taipei, Taiwan, a leading industrial mother board designer and total hardware system solution provider, have agreed to enter into a strategic partnership in the Communication segment.

This partnership will be put into effect via Ennoconn taking a 49% stake in Kontron Canada Inc. (KCI) at a price of US$ 57.3 million (approximately € 52.5 million), to be paid to Kontron AG. Kontron AG will retain the remaining 51% of KCI. This transaction will be subject to regulatory and corporate approvals, which are expected to be granted during early 2016.

Rolf Schwirz, Kontron’s CEO, says: “By entering into this strategic partnership with Ennoconn, a trusted business partner of Kontron for many years, we are achieving several strategic and operational objectives: most importantly, we convert our strategic decision to become a leading provider of hardware/software solutions into reality. But also, by tapping into the Ennoconn/Foxconn network, we re-establish a strong and permanent foothold in the APAC marketplace. Likewise, we intensify cooperation with a company which can help us lower our material cost as well as our production cost, thus giving our Communication business a new lease of life. Moreover, we regain access to production capacity in Asia which will boost our channel business in particular. And finally, the cash injection enhances our financial flexibility. This deal is transformational for Kontron – we could not be more delighted.”

By taking this step with Ennoconn, a subsidiary of Foxconn and one of the largest hardware manufacturers globally, Kontron moves into an excellent strategic position to take advantage of a rapidly changing technological world, determined primarily by the brisk development of the Internet of Things (IoT).

“This strategic alliance with Kontron will create great synergies and enable us to integrate core competencies of branding, manufacturing, global operations and logistics,” says Steve Chu, Ennoconn’s CEO. “The partnership will lead both Kontron and Ennoconn to becoming a powerful provider of embedded solutions and strategically important player in the IoT market.”

Boosting Kontron’s growth prospects

Kontron‘s Communication business has been facing a significant shift from hardware towards SDN (software-defined networks). As a result, this market has seen declining profitability and industry consolidation. Kontron started to respond to this challenge as early as 2013 and the strategic partnership with Ennoconn announced today is the next step in this response. The partnership will be in a strong position to serve the hard- and software requirements of the SDN market in the future, and will boost Kontron’s efforts to implement the strategic initiative announced at its Capital Markets Day in May 2015, to develop a first-class software/middleware offering.

Moreover, Ennoconn will provide production and supply chain efficiencies tailored to the market, and ODM capabilities to rapidly bring standard or customized hardware building blocks to production. Kontron brings application-specific solutions built on expertise in firmware, system management, virtualization, and integration of these with the hardware. Matched with Kontron’s market and application know-how as well as its customer relationships, the cooperation with Ennoconn will accelerate development and deployment of application-specific solutions.

Kontron already subcontracts about 10% of its board-production to Ennoconn, a level of collaboration which will widen and deepen as a result of the partnership: closer cooperation is also envisaged in the context of the two companies’ R&D, procurement, production and global logistics activities, as well as brand distribution, marketing and channel development efforts with a major focus on China. Kontron also plans to leverage Ennoconn’s significant competitive advantages in terms of time-to-market, cost efficiency and product quality.

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