In mid-October, leading Taiwanese computer makers – including Compal Electronics Inc., Clevco Co., and Mitac International Corp. – jointly bid for the thin-film-transistor liquid-crystal-display (TF…
In mid-October, leading Taiwanese computer makers – including Compal Electronics Inc., Clevco Co., and Mitac International Corp. – jointly bid for the thin-film-transistor liquid-crystal-display (TFT-LCD) subsidiary of the Hyundai Group. The South Korean firm announced its plan to sell the business in early August and has since been looking for prospective investors in Taiwan, Europe, the US and Japan. Hyundai’s move, according to a press report, underlines the gains that Taiwan has made on rival South Korea in the TFT-LCD market following the recent financial turmoil there. The report estimates that Taiwan’s TFT-LCD industry will account for 30% of the world TFT-LCD market in 2003 and will probably overtake South Korea as the top producer. While Taiwan currently accounts for only a small part of the TFT-LCD market, major investments announced or completed this year will make it a major player in the industry. International TFT-LCD equipment suppliers note that following Sharp, several other makers – Samsung, and LG, Taiwan’s Chunghwa Picture Tubes Ltd. and Acer Display Technologies (ADT), Inc. – are planning to produce fourth-generation TFT-LCD glass substrates in 730 mm x 920 mm and 680 mm x 880 mm sizes. Other domestic manufacturers are expected to follow suit soon. Equipment suppliers say that most of the necessary production equipment will be installed between late this year and early next year. In addition to upgrading equipment, the report says, most Taiwan manufacturers of TFT-LCDs are expanding production capacity. Hann Star Display plans to boost capacity to 80,000 glass substrates a month from its current 30,000; Chi Mei Optoelectronics, to 50,000 from 30,000; and Chunghwa, to 30,000 from 25,000. Unipac Optoelectronics, an affiliate of United Microelectronics Corp. (UMC), is planning to install a 3.5-generation production line at its factory Since 1994, Taiwan’s manufacturers have invested NT$ 120 billion (US$ 3.75 billion at US$ 1:NT$ 32) in TFT-LCD production. Taiwan now has seven manufacturers in the sector, including Chunghwa, Acer, Chi Mei, Unipac, Hann Star, Quanta Display, and Prime View International. Taiwan’s TFT-LCD industry had a less than smooth beginning. In 1992, Prime View’s former general manager, S. N. Lee, brought back the then-advanced single-chip drive TFT-LCD technology from the United States. He hoped to commercialize the technology and contacted 20 domestic conglomerates, including Tatung Co., Ltd., about the idea. His offer went unheeded until he met S.C. Ho, then chairman of Yuen Foong Yu Paper Mfg. Ho says that the papermaking and printing industry pioneered the commercial use of digital technology in Taiwan. He used to observe that paper was the medium of words in the past while monitors are the medium of words and pictures in the digital age. TFT-LCDs, he adds, are an increasingly crucial part of the display market. Driven by his idea, plus the fact that the chip industry was already prohibitively competitive to newcomers, Ho invested NT$ 100 million (US$ 3.13 million at US$ 1:NT$ 32) into R&D and certification of his technology in 1992. Two years later, he set up the island’s first TFT-LCD plant, Prime View, and introduced the island’s first domestically developed TFT-LCD. Prime View is regarded as Taiwan’s trailblazer in terms of TFT-LCD investment while Chunghwa Picture Tube is the first company here to commercialize TFT-LCD technology. Chunghwa’s TFT-LCD panels are made using technology from Mitsubishi’s Advanced Display Inc. Tightly Guarded Secret. While TFT-LCD technology was first developed in the United States, its use was limited largely to military applications until the Japanese widely commercialized the technology. Japanese producers have been highly protective about TFT-LCD technology, which has only recently been made available to producers in other countries. Consequently, Prime View was frustrated by Japanese manufacturers who charged “astronomical prices” in return for technology authorization. Over the last decade, Sharp, Toshiba, and Matsushita have all been involved in the development of TFT-LCD technology. Ironically, the business has often proven a loss-maker due to the expensive investment and small market. In order to obtain the coveted TFT-LCD technology, South Korean firms with government backing have used hefty compensation packages to lure Japanese specialists in the field. The efforts have paid off in growing market share over recent years. This year, Samsung may even dethrone Sharp as the world’s leading TFT-LCD manufacturer. With competition from South Korean rivals heating up, Japanese manufacturers have been forced to transfer their LCD-TFT technology to Taiwan, which offers a mixture of low production costs and a highly skilled workforce. Chunghwa is the island’s first beneficiary in the transformed environment. Even in their current predicament, Japanese manufacturers are cautious about transferring technology. A Quanta official notes that Sharp finalized the plan to transfer its TFT-LCD technology to his company only after 25 years of doing business with Quanta CEO P.L. Lin. Lin’s first contact with Sharp was as a vice general manager of Kinpo Electronics, Inc. At that time, Lin procured LCD panels from Sharp for Kinpo’s calculators and watches. Lin set up his own business, Quanta Computer, in 1988 to produce notebook computers. Sharp has since remained the company’s supplier of TFT-LCD panels. “Just like picking stocks, you have to know the boss of the enterprise in which you invest. That’s why Sharp chose to transfer its technology to Quanta,” notes a senior official at Quanta. Quanta’s involvement in TFT-LCDs is a natural extension of its mainstay business of notebook PCs. Because TFT-LCDs are the main component in notebook manufacturing, it is vital for the company to have a self-sufficient source of the panels in order to control costs. The company compares this situation to the importance of engine development to automakers. Developing self-sufficiency in TFT-LCD technology is no easy matter. Chi Mei Group is the only TFT-LCD manufacturer to adhere to the principle of self-development as it did when it decided to pursue in-house development of acrylonitrile butadiene styrene (ABS) 26 years ago. The group’s TFT-LCD subsidiary, Chi Mei Optoelectronics, clicked on its first self-developed TFT-LCD panel on the night of July 29, just as Taiwan was hit by an island-wide blackout. Taiwan’s TFT-LCD manufacturers are optimistic about the potential of the market. “Every 1.5% of the market that TFT-LCDs capture from cathode-ray tube (CRT) monitors will be enough to keep a TFT-LCD factory running at full capacity,” says T. J. Hsu, Chi Mei’s vice president in charge of marketing and procurement. This year, global demand for CRT monitors is estimated to reach 100 million units. Half of the CRT monitors in Japan alone are expected to be replaced with TFT-LCD monitors. “Over the next decade,” Hsu predicts, “all new monitors will probably have flat panels. TFT-LCD panels will not monopolize the market but they will certainly occupy a dominant position due to the relative maturity of their technology.” The greatest obstacle to Taiwan’s TFT-LCD aspirations is perhaps a shortage of specialists in the field. With the domestic industry still in its nascence, skilled specialists are scarce. Most of the existing experts in the line come from the Electronics Research & Service Organization (ERSO) of the semi-official Industrial Technology Research Institute and semiconductor companies. The rise of Quanta Display despite this obstacle thus came as a surprise to the domestic industry. The company recruited David Hsin, a former ERSO general director, and many of the organization’s other brains. Chi Mei has also lured many ERSO specialists, including P. S. Wu, a former ERSO project manager. Wu, who is in charge of Chi Mei’s technology R&D, is known as “the father of Taiwan’s TFT-LCD industry” due to his ownership of many technology patents. To retain specialists, TFT-LCD makers here offer stock options to their top employees and require them to sign contracts for three years or more. In 2005, Taiwan’s TFT-LCD industry is forecast to have 15 production lines, an increase from the current seven lines, and capture 32% of world markets. “The burgeoning development of Taiwan’s TFT-LCD industry has caught the eyes of its rivals just like the chip industry before it,” says Chi Mei’s Hsu.