Image Makers: AU Optronics

Nevertheless, as a result of the recent financial upheaval, AUO's net profits for the third quarter came to just NT$860 million, NT$22.57 billion less than the same period in 2007, a drop of 96%. Though this was better than the NT$4.2 billion loss for the quarter suffered by Chimei Optoelectronics, the other of the "two tigers" of Taiwan's display industry, there still remains a long economic winter to weather through.

AUO's revenues are approaching half a trillion NT dollars after only 12 years in business. Now the company is poised to live up to its new AUO Green Solutions concept, announced early in 2008. AOU's fortunes are closely linked to the success of the government's program to create two trillion-NT-dollar industries for Taiwan-semiconductors and display panels-and are worthy of our scrutiny.

Twelve years ago, Taiwanese consumer electronics giant BenQ saw a future in video technology. The company founded Acer Display Technology (ADT, a previous incarnation of AU Optronics) to control key upstream components, taking its place as an expert in flat-screen monitors. Two years later, ADT signed a technology transfer contract with IBM Japan. It began production soon thereafter, setting up Taiwan's first 3.5G TFT-LCD production line. The speed of the company's advance stunned the world.

After a decade of cultivation, one in every five display panels in the world now originates from AU Optronics (AUO), a market share of 18%, behind only Samsung and LG of Korea. This is very important in an era in which display panels play such a major role in consumer electronics.

In September 2008, AUO unveiled its new super-thin 42-inch LED TV display panel, less than one centimeter in thickness. With its high-efficiency white-light LEDs and improved cold cathode fluorescent lamp (CCFL) backlighting, it greatly reduces power consumption.

All sizes fit one

AUO's exacting style is inherited from BenQ Group chairman Lee Kun-yao. In 1996, when ADT had just started up, Taiwan's display panel industry was just getting under way, with pretty much every company within it signing technology transfer agreements with Japanese firms. ADT was no exception. Though uncertain which company it would cooperate with, ADT decided to first set about building a factory in order to be ready once the choice was settled.

"We called it 'concurrent engineering,'" says Chen Ming-jen, AUO's senior vice president of human resources. A year passed before the company decided to work with IBM Japan, but by that time the factory was already built, awaiting initial test production. Some months later, production began in earnest.

"Carpe diem" is AUO's watchword. When its competitors in Taiwan were still wrestling with 6G fab (32-40 inch) throughput problems, AUO was already building a 7.5G fab to take the 42- and 47-inch LCD TV market. In 2001, AUO realized it wasn't cost effective to have a back-end component plant in Taiwan with a large workforce. After several months, a location was settled on for AUO's plant at Suzhou in China's Jiangsu Province, and the facilities were systematically relocated there. Production began ten months after ground was broken. And when the company's display panel plant in Taiwan was operating at full capacity and claiming its share of the large-panel display market, AUO started producing pocket-sized 3.5G display panels and screens for cell phones and digital cameras. The company thus became a supplier of display panels of all sizes.

As smart cell phones, digital picture frames and GPS systems became hot sellers in the market, AUO's production lines began to turn out medium-sized display panels, making the company one of the world's few suppliers of all sizes of displays, ranging from 1.5-inch to 65-inch TFT-LCD panels for products such as desktop monitors, laptop computers, LCD TVs, in-vehicle monitors, digital cameras, digital camcorders, handheld DVD players, handheld games and cell phones, for total revenues of NT$480.2 billion in 2007.

In mid-2008, AUO announced the world's first curved display with a glass substrate, available in both concave and convex forms, making full use of the advantages of TFT-LCD full-color display technology, and transcending the limitations of soft materials (such as electronic paper) regarding display of colors. In the future, this technology can be used for such applications as watches and dashboards.

The driving force of CTSP

Seven years ago, ADT merged with UMC's subsidiary Unipac Optoelectronics to form AU Optronics. In 2006, the company again merged with the Quanta Group's subsidiary Quanta Display Inc., becoming the world's top 6G line in total output volume, with a 20% share of the world's market for large-panel displays. It also became the first TFT-LCD manufacturer to be listed on the New York Stock Exchange.

AUO currently has four 3.5G fabs, one 4G fab, four 5G fabs, two 6G fabs and one 7.5G fab, and is now building a 7.5G/8.5G hybrid fab, for a total global workforce of over 43,000 people in its plants in the US, Japan, South Korea, Singapore, the Netherlands, the Czech Republic and China. Just as Chimei drove the growth of optoelectronics in the Southern Taiwan Science Park, AUO is the major driving force behind the display panel industry's cluster effect in the Central Taiwan Science Park.

According to some media outlets, AUO's production technology is consistently ahead of Taiwan competitors, but is still far behind its Japanese and Korean counterparts. Indeed, this lag is a strategy of AUO. Competition is fierce among the top players in the global display panel industry, especially with the Japanese and Korean corporations battling each other for supremacy for so many years, and companies wishing to invest in new-generation production lines have to expend manpower, financial resources and time, needing about a year before they can produce at full capacity. But mid-sized AUO was unwilling to take this unnecessary risk, instead absorbing the valuable experience of others before launching into production of products needed in the market.

However, this is not the extent of AUO's ambition. Its 8.5G fab (for 55-inch displays), currently under construction, is scheduled to begin production in the second half of 2009. And AUO will soon become the third company behind Sharp and Samsung and the first in Taiwan to enter the 10G fab business; i.e., glass substrate surface areas of at least 2880 mm x 3080 mm, or 8.6 square meters. Although the actual specs for cutting the display panels have yet to be set, AUO does not rule out pursuing even larger sizes, surpassing Japan and Korea.

Three years ago, AUO invested over NT$80 billion to build a 6G fab in the Central Taiwan Science Park, bringing Taiwan into the manufacture of 30-inch-plus LCD panels for TVs. Shown here is a clean-room facility.

AUO's incorruptible workforce

Any ambitious enterprise needs to keep pace with the trends and pulses of the world. However, beyond planning and preparation, the key to business success lies in a company's people and culture.

"The values of AUO's people are clear-cut," says Chen Ming-jen, who has seven years of experience as vice president and played a key role in ADT's growth and development. He recounts that most personnel in ADT's initial stages were transferred in from its parent company, BenQ, and many members of upper management were recruited from overseas. Those who remained with the company must adhere to the same core values-dedication to work, commitment to excellence, and care for society.

"All businesses stress honesty and integrity, but it's difficult to escape from the need to entertain clients. However, at AUO, as our business associates know, business discussions are scheduled during office hours to stop people from forming 'afterparties' to discuss under-the-table deals," says Chen. AUO's corporate culture, fostered in Taiwan, has spread to its branches in China, and those who visit on business know that AUO's people do not take "gifts."

"AUO sees employee development as very important, striving to nurture in employees a passion for people and work," says Chen. New employees undergo five days of newcomer training, and all personnel participate in two days of motivation camp each year. AUO Learning College offers 1,500 courses for employees to choose from, in subjects such as professional training, culture, management and self-development.

In September 2008, media attention was drawn to the AUO 360 team, headed by company vice president Hsieh Shih-fang, for the warm-up session of the ING Taipei Marathon. Hsieh jokingly called it the "first lesson in fostering executive power." In the December finals, AUO will send over 1000 people up north to compete. Another popular class is hiking, with Yushan and Hsuehshan being the holy grails of AUO's participating employees.

There are three stages to TFT-LCD manufacture. The first stage, array fabrication, is similar to semiconductor fabrication, but the thin film transistors are affixed to a glass substrate rather than to silicon wafers. The mid stage is cell fabrication, which involves sandwiching the previously made array onto a glass substrate with color filters, and injecting liquid crystal between the two glass substrates. The final stage of the fabrication process for this module is to add other components, such as a backlighting panel, circuitry and external frame to the cell.

Grooming successors

To enrich work content, employees are rotated to different job responsibilities after a period of time to learn how to solve problems from different angles. For example, engineers, who are usually immersed daily in R&D, find after being transferred to the factory floor that some designs are not suitable for production line operations, and from this they learn how to strike a balance between design and manufacturing.

Regular rotation among upper management is another necessary process of training successors within AUO. The display panel industry is highly complex, what with capital raising, technology, labor and precision supply chains all controlled by the same company.

Chen Ming-jen explains that the front-end manufacturing process for display panels is a precision semiconductor technology involving fabricating thin film transistors on a glass substrate, then adding a glass substrate with color filters, and then injecting liquid crystal between the two glass substrates. Afterwards, the panels are cut to the required dimensions. The back-end module fabrication is labor-intensive assembly work, involving fitting components like driver ICs and backlighting modules into LCD modules. The finished displays are then sold to downstream computer, monitor and camera manufacturers.

Given the large fluctuations in the display panel market and constantly changing applications, plus the fact that the TFT-LCD industry has changed from being product-oriented to service-oriented, if AUO's top-level managers do not have sufficiently comprehensive knowledge of each area, they will not be able to adapt to the rapid pace of change in the market.

AUO president Chen Lai-juh, who is set to take on additional responsibilities as CEO in 2009, has been rotated through seven posts over the last nine years: special assistant to the president, production manager, IT manager, product manager, sales representative, manager of the global manufacturing headquarters, and president, giving him a clear understanding of LCD manufacturing and the supply chain, and how to make structural adjustments in response to ever-changing industry trends.

For example, fierce competition and shrinking profits in the field of small and medium-sized display panels has led to the problem of "nano-profits." So to avoid losing profit in its large panel business, AUO carried out a major reform of its organizational structure, increasing the independence of the computer monitor, LCD TV and small and medium sized panel divisions, connecting the sales units, supply chains, R&D and production lines, and dividing responsibilities for supply chain and manufacture among the business units, thereby boosting the quality of customer service.

Early on, AU Optronics (AUO) was based in Hsinchu Science Park and in Longtan, Taoyuan County. In 2005, the company opened a 6G fab in the Central Taiwan Science Park, spurring the formation of a cluster of optoelectronics companies there, just as Chimei Optoelectronics did for the Southern Taiwan Science Park. Shown here is the AUO plant in Hsinchu.

Boundless possibilities

A commitment to technology and R&D is a necessary condition for any high-tech firm wishing to take an advantageous position.

Six years ago, AUO set up a technology center which now has over 1,300 R&D personnel, making it the largest optoelectronics R&D center in Taiwan. In addition to general manufacturing and product technology, the company is devoting efforts to developing low-temperature polysilicon (LTPS), in-cell multi-touch panels, soft "electronic paper" display panels, ergonomic interface technologies (which can be used in wide-angle displays), 3D imaging, curved-surface displays and other cutting-edge technologies.

AUO's R&D extends to Raydium Semiconductor Corporation, 2007's best-performing emerging stock company, whose main area of expertise is driver ICs for large display panels. Driver ICs account for 15-20% of the cost of display panel manufacturing, and need to be adjusted according to panel size and amount of electric current for custom manufacturing. To prevent others from controlling these key components, AUO and its parent company BenQ decided to invest in this technology themselves, and this has proven to be a boon.

AUO insists on developing proprietary technologies, which the company's engineers are able to do on their own. When entering the field of 5G fabrication, AUO decided to stop using IBM fabrication technologies, instead having their 5G fab employees undergo training at a 4G fab to learn more advanced fabrication technologies. Even though this would increase operating risks, it would safeguard their autonomy in fabrication technology. As of May 2008, AUO had more than 4,300 patents, and 5,323 more were pending.

To address the shortage of technicians, AUO began four years ago to cooperate with National Taiwan University, National Cheng Kung University, National Tsing Hua University, National Chiao Tung University (NCTU), Yuan Ze University, National Sun Yat-sen University, and even the Harbin Institute of Technology in mainland China to train diverse talent. Each year, the company selects 30-50 students, including PhD candidates, to take part in its two-month A+ Seed Summer Internship Program, with job descriptions and remuneration comparable to those of full-time employees. In four years, some 3,000 students have applied, with nearly 100 students serving as interns. Six A+ Seed interns have so far entered AUO.

In 2008, AUO gave a trial run of the first "EE College" in the technology industry. This is aimed at students with master's degrees in physics, mechanical engineering, computer engineering or optoelectronics who have freshly graduated or have less than two years' work experience and who are interested in the R&D of optoelectronics and electronic circuits but who don't have adequate academic qualifications. The courses are taught by instructors from NCTU, providing six months or 400-500 hours of free courses in electronic circuits as well as a training stipend. "We anticipate enrolling 30-40 candidates a year," says Chen Ming-jen.

In mid-2008, AUO announced the world's first curved display with a glass substrate, available in both concave and convex forms, making full use of the advantages of TFT-LCD full-color display technology, and transcending the limitations of soft materials (such as electronic paper) regarding display of colors. In the future, this technology can be used for such applications as watches and dashboards.

Green Solutions

With the rising tide of environmental consciousness, many businesses are carrying out some degree of energy conservation activity, such as improving data sharing over their internal computer networks to cut back on paper consumption and no longer using paper cups, or substituting environmentally friendly materials. But in February 2008, Chen Lai-juh announced a more rigorous set of "Green Solutions."

Says Chen, "The success and position of a business is not merely found in its financial statements; it also hinges on its commitment to environmental and social participation." To reduce greenhouse gas emissions, AUO gained ISO 14064-1 certification for its seven plants in China and Taiwan, becoming the first TFT-LCD manufacturer in the world to do so.

AUO is also about to launch its 877 Eco-Efficiency Index (EEI) plan, aiming to attain a recycling rate of 80% and to reduce greenhouse gas emissions and water usage by 70% below the 2004 figure by 2010 as part of its commitment to saving the planet.

In September 2008, AUO gained an excellent rating for industrial packaging from the Environmental Protection Administration for its paper cushion structure for LCD TV panel packaging, and announced its Eco Plus series of energy-saving products, which are the world's lightest, thinnest, and most efficient when it comes to power consumption, materials, packaging and shipping costs. This includes an ultra-thin (less than a centimeter) 42-inch TV display, using LED backlighting (cutting power consumption by half) and high dynamic contrast technology, which may bring AUO's business to a new high and help lead Taiwan's flat-panel monitor industry toward green innovation.

AUO's new 42-inch double-sided electronic notice-board uses AMVA (AUO Advanced MVA) super-wide-angle display technology. The two sides use the same backlighting module, and the entire unit is only 6 cm thick. It can display different content simultaneously, greatly reducing notice-board area and boosting the effectiveness of corporate advertising.