LCY Chemical: Setting a Green Example

In late January 2014, venerable Taiwanese petrochemical company LCY Chemical Corporation announced it would sign a 50:50 joint venture with the American firm Kraton, a leading global polymer manufacturer, to create a brand new company, Kraton Performance Polymers plc.

In this mutually beneficial joint venture, the industry forecasts that LCY’s revenues will grow sharply after the new company opens.

The ability to expand the company’s business through mergers and spin-offs and to enter into the area of high-value-added goods is a key strength of LCY chairman and CEO Bo­wei Lee. Since 1990, when Lee attained the post of president at age 35, LCY has grown from a locally oriented traditional business into a multinational group covering such diverse areas as chemicals, plastics, rubber, copper foil, solar energy, and bioenergy, with its business territory covering Taiwan, mainland China, the United States and a number of Middle Eastern countries, and its revenues and profits growing 18-fold.

Striving for total workplace safety, LCY hasn’t had to file an insurance claim in over 15 years. Its dockside storage facility is equipped with comprehensive fire prevention systems.

Founded in 1965, LCY Chemical was in its early years a labor-intensive traditional chemical company. It was also a polluter. In the 1980s, wastewater and gas emissions from LCY’s Hsinchu plant sparked protests from nearby residents as well as students and faculty from National Tsing Hua University and National ­Chiao Tung University, who surrounded the plant. This protest was seen as an important milestone in Taiwan’s environmental movement.

LCY’s transformation from an environmentally blacklisted company to the model green business of today was initiated by Bo­wei Lee, who succeeded his father at the helm of the enterprise.

When Lee was 11 years old, his father, LCY founder Lee Kun­zhi, sent him to school in the United States. He went on to earn his bachelor’s and master’s degrees in chemical engineering at MIT, as well as an MBA from Stanford University.

Bowei Lee took over as CEO of LCY in 1990, coincidentally the same year that the government cut the import tariff for chemical products from 27% to 1%, a policy change that caused considerable competitive pressure among Taiwan’s businesses.

“The company needed to be globally competitive if it was to have a future,” says Lee regarding his determination to reform LCY’s structure.

LCY chairman Bowei Lee has successfully led the company to become a model green business.

In 1995, LCY and CPC Corporation set up a joint venture in Qatar, founding Qatar Fuel Additives Co. Ltd. (­QAFAC). This was Lee’s first step in going international.

“That year, I practically camped out at the CPC offices for months on end in an effort to convince CPC to take part in the venture,” says Lee.

The total figure for the ­QAFAC investment plan was US$6 billion. Capitalizing on the business opportunities in energy, LCY broke even after just four to five years of ­QAFAC’s operation. To this day, ­QAFAC remains one of the two companies’ most profitable “golden geese.”

Besides joint ventures, Lee proved adept at using mergers to expand the group’s business territory and technological base.

One example is when LCY merged with the Baytown, Texas, thermoplastic elastomer (TPE) plant of the Italian state-run company Polimer Europa SAP in 2003. The factory had been seeing losses during the 11 years since its founding, but Lee took a liking to its advanced polymer rubber technologies, which would help LCY upgrade its facilities. But Lee’s father, worried that Lee would be unable to lead a plant staffed by Americans, did not express support for the merger.

Eloquent and equipped with professional expertise, Lee is a born master at negotiations. He spent seven months persuading Polimer Europa to sell him the factory at the low price of US$11 million (the plant had cost US$70 million to open). His father, seeing it as “quite affordable,” agreed to sign the contract.

Six months after joining the LCY Group, the factory started making a profit. Thanks to increased productivity from the addition of fresh blood, LCY’s TPE division gradually grew to be the third largest in the world. And in the wake of the successful merger, Lee took his father’s place as chairman, becoming the youngest leader in Taiwan’s petrochemical industry.

After Lee took over chairmanship, LCY began to focus on safe, non-toxic and technically involved polypropylenes (PP) and thermoplastic elastomers (TPE).

The specialty TPE styrene-ethylene/butylene-styrene (SEBS) is his masterwork. In 2011, LCY went about developing SEBS, which uses stable ingredients and contains no plasticizers or proteins. This material can be used to make medical equipment such as blood bags, IV drip bags and syringes, replacing PVC, which is harmful to human health in the long term. It is also far more profitable than general TPE.

“Chemistry can be green,” Lee insists. Under his leadership, LCY has recently branched out into bioenergy and solar energy as part of the company’s efforts to become “green.”

Besides stressing the environment, LCY is also considered domestically to be a very stringent petrochemical firm in terms of occupational safety management. Seeing it as a matter of prime concern, Lee personally presides over occupational safety meetings, and requires all employees to give cogent reports and prevent unsafe behaviors that could result in accidents. “Business managers simply cannot let their guard down due to close calls or lack of serious consequences from incidents,” he says sternly.

Bo­wei Lee’s lifelong vision has been to lead the company his father built to become a world-class enterprise. With his strategy of joint ventures, mergers and product diversification, he is coming close to fully attaining this goal.