Fortunately, Chi Mei Optronics quickly started turning a tidy profit. In 2007, before it had been in existence even a decade, it broke through the NT$300 billion mark in sales. (In comparison, its parent company Chi Mei still hasn't hit NT$100 billion.) CMO had become the goose that was laying the golden eggs. And by establishing the Southern Taiwan Science Park Optoelectronics Cluster, the company also served as a model corporate citizen that showed true love for Taiwan.

Yet amid the fierce winds of the global financial crisis, that early jest about working the field until bankruptcy almost came to pass. Fortunately, with the sugar daddy of Chi Mei behind them, and with mainland China's current policy of pushing the sale of electric appliances in the countryside, CMO's fortunes have stabilized a bit. The coming year will be key for the company: it must tread carefully to survive.

For its 10th anniversary celebration in September of 2008, CMO chose former Academia Sinica president Lee Yuan-tseh as the keynote speaker and picked Tree Valley, Taiwan's first eco-industrial park, as the site. At the celebration, Ho Jau-yang, who was then CMO's general manager, announced the company's "to Earth with LOVE" vision, which involves a corporate commitment to a multifaceted environmental approach involving "green living, operation, value and environment." He also announced that the Chi Mei Group would be moving into the energy sector during the coming decade.

Several months later CMO released shocking fourth-quarter results: Under the impact of the financial crisis, the company faced after-tax losses of NT$31.4 billion. These not only ate up profits from earlier quarters but also dragged the company into the red for the year to the tune of NT$6.5 billion. It was the worst year in the company's history.

With CMO bruised and battered, its 80-year-old founder Hsu Wen-lung had little choice but to move to the front lines. A belt-tightening plan was announced: executives took pay cuts, workers were put on leave without pay, and large-scale layoffs-a first in the history of the company-resulted in 3,000 temporary workers losing their jobs. Complaints by fired workers on the Internet cast shadows over a company that had been known as a "good employer" and had been admired for its humane management.

In the first and second quarters of 2009 CMO suffered losses of NT$19.5 billion and NT$8.8 billion respectively, but the company predicted that the situation would turn around. And indeed in the third quarter orders began to exceed capacity. CMO, like Taiwan Semiconductor, began to rehire laid-off workers. Nevertheless, on April 1 the old CMO management team resigned, and Wang Jyh-chao took the helm, vowing to do his best to steer the company through the troubled waters of the era.

At the end of June in 2006, CMO turned on its first 30-inch non-jointed TFT-LCD panel. The accomplishment was an affirmation of its efforts at developing large displays. The Southern Taiwan Science Park, where CMO is located, is southern Taiwan's brightest manufacturing cluster.

Grabbing opportunities

On a late July day southern Taiwan is sweltering, and the Tainan high-speed rail station is almost deserted. More than 100 taxis are lined up in a yellow line, quietly awaiting the end to their hibernation. When the driver hears that the destination is the Southern Taiwan Science Park, he considerately asks if I'll need a ride back. He would be willing to wait outside the factory, he says. Apart from those going to CMO, which is its last, great hope, few visit the vast park these days.

"Society has great expectations for us, and we have the duty to make CMO profitable again," says CMO president Wang Jyh-chau. Although the company has been losing money for the last six months, it shipped 19.13 million large LCD panels in the second quarter, the most in its history. And in early September it took out a NT$40 billion syndicated loan. It was the biggest financing deal carried out this year in Taiwan, and it shows the determination with which CMO is approaching its revival.

From another angle, the global financial tsunami served as an alarm, reminding Chi Mei about the dangers of its fast growth, which had previously been a cause for pride. Over the past 10 years, CMO expanded at a rapid pace, opening one new factory a year and developing its own technology. Its aggressiveness is the source of its current danger (its net debt ratio is 115%) but also its greatest strength as the company struggles to survive the days ahead. CMO is relying on the vast potential of the LCD panel industry.

"The first LCD we made was only four inches," Wang recalls. "It cost US$800, and I sold it to a Japanese pachinko machine manufacturer. Now we sell 42-inch LCD screens for only US$300. It's been an unimaginable advance!" Wang has been in the field for 19 years and has witnessed its rapid development first-hand.

When screens with a 4:3 aspect ratio had long dominated the market, always-innovative CMO introduced 19-inch wide screen displays with a 16:10 ratio. Selling them for the same price as traditional 17-inch screens, the company was quickly able to gain market share.

Cross-strait presence

Back when Hsu Wen-lung first took note of the LCD industry and visited an optoelectronics factory, he discovered that Chi Mei already excelled in making some of the chemicals used in the plant. It was then that he decided to enter the field. Hence, it wasn't entirely an outsider's risky gamble. Hsu not only invested with clear-eyed precision, but he also set strategy quickly and firmly, earning much praise at the time.

"Back then our first factory wasn't very productive. Even though we couldn't mass produce yet, the founder surprisingly wanted to spend a lot of money to build a second factory," Wang recalls. Hsu believed that the inefficiencies of the first plant just represented "interest paid for building a good foundation." He believed that if they invested in a second plant early, establishing needed capacity months in advance of expected demand, the company would recoup its investment many times over when the time was right.

The second factory was completed ahead of time, just as the global economy began to recover from the popping of the Internet investment bubble in the second half of 2001 and the demand for LCD screens began to grow dramatically. Having already brought its second factory on line, CMO, which had previously been losing about NT$300-500 million a month, quickly started turning a profit. And CMO continued to open new plants year after year. Four years ago it opened a 7.5-generation fabrication plant (1950 x 2250 mm2), an 8.5G fab plant (2200 x 2500 mm2), and a 6G fab plant (1500 x 1850 mm2), hoping to overtake AU Optronics as Taiwan's largest LCD panel manufacturer.

Currently, CMO has eight first-stage TFT-LCD plants in the Southern Taiwan Science Park, and it has several module assembly plants in Zhejiang Province's Ningbo and Guandong's Nanhai on the mainland. This allows it greater comprehensiveness and flexibility with its product lines. In 2008 CMO earned net profits of NT$318.1 billion and held a 14.8% share of global TFT-LCD sales. Under the mainland's policy of pushing sales of electronic goods in the countryside, Chi Mei won 100% of the contracts to supply 26-inch energy-efficient panels there. The company can definitely be counted as a big winner from that mainland government policy.

(left) The sculpture of two riders on bicycles in front of CMO's headquarters symbolizes the company's fighting spirit of perseverance in face of obstacles.(below) President Wang Jyu-chau took the reins at a troubled point in CMO's history. Great hopes ride on his performance in the post, to which he rose only seven years after joining the company.

Technological autonomy

"CMO's autonomous R&D capacity is an important reason that we have become a leader in this field," Hsu says. "In Taiwan we are the only LCD panel manufacturer not reliant on technology transfers from abroad!" When you depend on outside technology, Hsu believes, you are constrained by others. For example, there can be restrictions on where you can sell or stipulations about the source of raw materials. But once you research and develop your own technology, then "you have a blank canvas on which to paint," says Hsu, who is a great lover of music and art and an amateur painter.

Although CMO took its first steps late, it entered the domestic LCD industry when the economy was on the upswing. When first established, it hired top people from Prime View International, Unipac Optoelectronics and the Industrial Technology Research Institute. And then, when the Japanese panel screen industry fell on hard times, CMO took the opportunity to form a strategic alliance with Fujitsu and acquired DTI, which had belonged to IBM, Japan. These moves strengthened its autonomous R&D capacities. What's more, the color filter plant that CMO established itself gives it full control over quality. These steps have allowed it to keep pace with big Korean and Japanese firms. In recent years, CMO has also led the world in screens developed using its own technology. At the forefront of the global movement toward wider screens, it successfully started to produce 19-inch and 22-inch LCD panels.

Unlike other Taiwan manufacturers that are focused on screens for desktop and notebook computers and cell phones, from the very beginning CMO was attacking the "bigger-the-better" LCD market. The company was a pioneer in making big screens and now successfully produces screens larger than 50 inches. Among these, its 56-inch QFHD screen has a resolution of 3840 x 2160 pixels-four times the number necessary for full high-definition television (1920 x 1080). The accomplishment has earned it the king's crown among global producers of large HD screens.

In early June, during the trade fair Display Taiwan 2009, CMO unveiled next-generation displays, including 3D panels, touch panels and advanced medical panels.

The 3D television screens immediately attracted the attention of sci-fi buffs. Apart from a 23.6-inch screen that requires users to wear special goggles, which is the first high-quality 3D screen in the world, CMO also unveiled a 47-inch panel with a multi-view design, which allows viewers to see realistic three-dimensional images without the need to wear goggles. A notebook screen that can be switched between 2D and 3D modes is another important product that CMO has developed itself.

At the end of June in 2006, CMO turned on its first 30-inch non-jointed TFT-LCD panel. The accomplishment was an affirmation of its efforts at developing large displays. The Southern Taiwan Science Park, where CMO is located, is southern Taiwan's brightest manufacturing cluster.

One-drop fill

"In order to raise our competitiveness, we always have a lot of cutting-edge technology at the testing stage," Wang explains. "We make bold use of it and are constantly overcoming technical obstacles." For instance, CMO acquired one-drop-fill (ODF) technology from Fujitsu, which allowed it to enter the ranks of the leading global manufacturers of large screens.

"To take the lead with ODF technology, we had to risk massive losses if we failed. Other manufacturers weren't willing to take that risk and sat on the sidelines. They waited until fifth-generation factories to use the technology. But CMO dared to use it in fourth-generation plants."

The manufacture of traditional LCD panels requires the creation of a vacuum and the placement of liquid crystals between two sheets of glass. It requires more than five days to finish the process on screens that are 32 inches or larger. On the other hand, the ODF process uses technology that's similar to an inkjet printer, which applies liquid crystal evenly in drops onto the surface of a sheet of glass and then attaches another sheet of glass to it. As a result, hardly any more time is required to manufacture a large screen than a small one. Even the largest screens require only a few minutes. The process, by reducing the chance of liquid crystal deformities, cuts material waste and greatly raises productivity.

"Fujitsu supplied that cutting-edge technology, but we had to resolve for ourselves problems with contamination and with unevenness in the application of the liquid crystal. Had we failed, we would have lost more than NT$10 billion!" Wang recalls.

CMO led the field by building its third plant (a fifth-generation factory) with clean rooms on the ground floor. That meant dispensing with the traditional filtering system that pulled air vertically up through clean rooms, which had their floors built above high structures. Furthermore, these new clean rooms used "direct-docking stockers" (DDS) for materials handling in place of automated guided vehicles. This represents another area in which CMO has led the industry.

At the end of June in 2006, CMO turned on its first 30-inch non-jointed TFT-LCD panel. The accomplishment was an affirmation of its efforts at developing large displays. The Southern Taiwan Science Park, where CMO is located, is southern Taiwan's brightest manufacturing cluster.

Boldly innovating

"With the growing size of panels and of the glass substrate used to make them, the production equipment has also become heavier and heavier. In order to safely bear the weight, people in the field long knew that the trend was toward single-floor factories. But other firms didn't dare take the lead and so they didn't start to use them until their 7.5G fabs."

During the 5G-fab era (2003), Wang insisted that clean rooms be built directly on the ground. Although this required dealing with some purity issues, it dramatically brought down costs. And the company's DDS system, a cassette assembly line, allows the glass substrate to be moved from station to station during the manufacturing process, obviating the need for clumsy and expensive automated guided vehicles. It was another fruit of Chi Mei's own R&D.

"Why are we willing to try what others are scared to try?" Wang asks. "In fact, it goes back to the authority that the company's founder granted us: he's given professional managers a lot of room to realize the company's potential."

Wang points out that other people in the industry knew about these cutting-edge technologies, but they dared not take the first step because they were scared of risk and the chance of failure. On the other hand, Chi Mei's culture encourages innovation and is tolerant of mistakes. Furthermore, it believes that "if it's the right thing to do, then boldly do it." There's no need to report to many levels and clear all kinds of bureaucratic hurdles.

"Giving people authority to set policy has risks. In particular, when the workers implementing the policies are unwilling to use their brains and accept challenges-that can really cause problems," explains Wang. Fortunately, "Southern Taiwanese are honest and straightforward, and when they face problems they work hard to figure out how to resolve them. No one cuts corners just to finish their assignments quickly."

As Taiwan industry works to find a "green" direction, CMO has spent NT$200 million to construct its recreation center. On a lot of 225,000 square feet, the building of about 100,000 square feet has earned the very first Taiwan EEWH Diamond-Class Certification. Compared to a conventional structure of the same size, it saves 440,000 kWh of electricity and 1,200 metric tons of water every year.

Carbon footprint verification

Wang believes that CMO's policy of rapid expansion over the last several years was correct: "The field of optoelectronics has existed in Taiwan for only a little more than 10 years, but it has already generated more than NT$1 trillion [it broke through the NT$1-trillion mark in October of 2006]. It's surpassed the semiconductor industry, which has a history of 30 years of development in Taiwan, to become Taiwan's largest industry. Accounting for over 10% of GDP, it has shown remarkable potential."

"LCD displays already occupy the mainstream; it will be very difficult for some new killer technology to come along and supplant it," says Wang. Take, for instance, televisions. Plasma screens were originally considered superior, but TFT-LCD screens have now surpassed them both in clarity and color fidelity. And once LCD screens begin to use LEDs for backlighting, it will resolve the problem of LCDs being electricity hogs and will thus allow the industry to reduce its carbon footprint and bring down energy consumption.

To help meet the company's green "to Earth with LOVE" goals that CMO established on its 10th anniversary, it completed the world's first carbon-footprint measurement certification for LCD screens in mid-August.

"The LCD panel production process and its use of materials and spare parts are extremely complicated. It's not easy to understand the process backwards and forwards and figure out how much CO2 is produced and how much water is consumed." Gaining this DNV certification for 15.4-inch laptop screens required not only Chi Mei's participation but also the cooperation of 40 upstream and downstream firms in order to fully understand all the data related to the creation of greenhouse gases over the course of its manufacture.

"More and more companies are announcing green strategies, but you can only truly implement these policies if you have honestly ferreted out and disclosed your carbon footprint." For instance, Wal-Mart, the world's largest retailer, is now asking its 100,000 global suppliers to list the water consumed and greenhouse gases released during the manufacture of its products. Altogether, it is calculating 15 different items that are either "environmental costs" or "social costs." It then affixes a "green scorecard" to products for consumers' perusal.

"When both retailers and consumers are putting growing emphasis on green products, producers have an even greater duty to provide green products," avers Wang.

At the end of June in 2006, CMO turned on its first 30-inch non-jointed TFT-LCD panel. The accomplishment was an affirmation of its efforts at developing large displays. The Southern Taiwan Science Park, where CMO is located, is southern Taiwan's brightest manufacturing cluster.

Changing operational strategies

With the LCD market reaching maturity, opportunities for growth in the future will be more limited. Consequently, apart from developing niche products (such as special medical panels or large, bright panels to be used for public displays), CMO also wants to branch out and invest in green industries such as LED manufacture and solar power. And after being hit hard by the recent financial crisis, Chi Mei has also begun to consider pursuing major changes in its operational strategies.

"In the past," says Wang, "CMO always relied entirely on developing technology under its own power: From the sources of backlighting, to backlight modules, to color filters, to driver ICs, the company directly invested in them. Consequently, we acquired a lot of debt, which has become an operational burden. In the future, we will make more use of other companies' strengths and open up new business lines. Only by so doing will we be able to nimbly adapt to changing times."

Finding excellent companies elsewhere in the production chain, and working with them to make it through the recession together, is step one in Chi Mei's strategy. Recently, CMO formed an alliance with Prime View International, which is the world's largest electronic-paper manufacturer. On the one hand, the alliance will provide Prime View with the use of one of CMO's 5G fab plants. On the other hand, it will strengthen CMO's position in the e-paper realm.

Whether seeking alliances or acquisitions, or pushing internal streamlining, this is a game that international high-tech companies are used to playing. Chi Mei must learn to play it too if it is to truly transform its outlook from that of a traditional company to that of a high-tech firm. As for the results, only time will tell.

At Display Taiwan 2009, CMO vice president Kuo Chen-lung introduces the company's 23.6-inch 120-Hz 3D LCD screen. CMO only started mass production of 3D screens two years ago, but it has already become one of the world's leading makers.