Toshiba has given up on reaching a deal with Compal over building its new tablet PCs and is instead working with Pegatron. Toshiba wanted to partner with Compal to develop two tablet PCs for introduction at the end of 2010. One was to ship with Android and Nvidia's Tegra 2 processor and the other Windows CE 7 with a dual-display design.

It is not clear why Toshiba could not reach a deal with Compal. Certainly the outfit would be disappointed not to be working with Toshiba.  Compal does not have any first-tier PC brands' tablet PC orders.  It might get a few orders from second-tier and regional brand vendors in the short-term.

According to Digitimes the long term plan is to try and butter up Dell. Its rival Quanta is currently in partnership with both Acer and Lenovo for tablet PCs. Acer is expected to launch its tablet PCs including a 7-inch Android model using Qualcomm's Snapdragon processor in the fourth quarter.

Lenovo is also working with Wistron on tablet PCs. Inventec currently is manufacturing tablet PCs for Hewlett-Packard  while Dell's 5-inch Streak, which uses Android and a Qualcomm processor, is made by Qisda.

Pegatron is laughing all the way to the bank.  In addition to its Toshiba orders it also has tablet PC orders from Asustek Computer which are expected to ship in the third quarter.