ASUS announced that it is pushing back plans for the opening of a new factory in the Pudong district of Shanghai from the fourth quarter of 2004 to mid-2005. The delay comes in response to a recent tightening of China's macroeconomic policies, which has led to stricter government regulations in everything from official land purchases to loan procurement.

 

A statement from ASUS also emphasized the need for careful planning as the new production facility will be critical to its overall capacity needs for the next five years. Another factor believed to be behind the delay is the slack demand for LCD TVs. ASUS was expected to announce a plan to enter the LCD TV market in the fourth quarter, but with the market sluggish, there is less urgency to open the new factory. ASUS acknowledged that the delay means less production capacity than expected for the fourth quarter busy season, and thus they will step up production at their Suzhou plant and rely on outsourcing to make up for possible shortfalls.

 

ASUS set up their factory in Suzhou in 1999, which allowed the maker to quickly amass scale in the motherboard segment. Expansion needs spurred ASUS to look into opening a second production facility in Shanghai, and they eventually settled on the Kangqiao Industrial Zone in Pudong's Nanhui district. The Shanghai factory will cover over 50,000 square meters when finished.

 

In order to lure in ASUS, Kangqiao Industrial Zone guaranteed that there would be no power shortages, a connector highway to the airport and harbor would be swiftly constructed, and ASUS competitors would be prohibited from moving into the zone. ASUS secured a similar protection against power shortages from the Suzhou government, as many of its primary clients such as Dell, HP, and Apple have expressed concerns about power shortages in China.