Compaq Computer Corporation and Subsidiaries - Page 18




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          (Jabil); Xetel Corporation (Xetel); and Bull HN Information                 
          Systems, Inc. (Bull HN).                                                    
               Most of these unrelated subcontractors were located in the             
          United States; however, there were some exceptions.  Lung Hwa was           
          a Taiwanese PCA manufacturer from which Compaq U.S. purchased               
          PCA's from 1990 through 1993, and Solectron had plants in the               
          United States and Malaysia.  However, the Solectron plant in                
          Malaysia primarily manufactured simple PCA's for disk drives and            
          telephone headsets.  The more complex Solectron boards were built           
          at the Solectron California plant because that plant was more               
          advanced.                                                                   
               Most of the unrelated subcontractors that did business with            
          Compaq U.S. between 1990 and 1993 used the same pick-and-place              
          equipment and test equipment as Compaq U.S.  There were, however,           
          some exceptions.  For example, Compaq U.S. tolerated the use by             
          Philips of non-Fuji equipment because Philips manufactured the              
          pick-and-place equipment that it used and was capable of                    
          operating and repairing Philips equipment, alleviating potential            
          production concerns.  Philips, however, later converted to Fuji             
          placement equipment.  Lung Hwa used Panasert and Xetel used                 
          Panasonic placement equipment rather than Fuji machines, but                
          Compaq U.S. ultimately terminated its business relationship with            
          both companies.  Lung Hwa was unable to meet Compaq U.S.                    
          production demands without exceeding quoted prices, and Xetel               





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