The last Apple product launched before Steve Jobs died in October 2011, the iPhone 4S, was the first smartphone to take photos of a quality similar to those of a professional single-lens camera. With this weapon in hand, Apple fans started the “check-in” frenzy that quickly emerged as a fixture in modern life. 

One of the keys in the dramatic improvement of the new smartphone’s photos was its incorporation of a filter made of blue glass to absorb excessive infrared light and restore the pictured object’s natural color. After being introduced in the iPhone 4S, blue glass filters soon became standard components in all high-end smartphones.

Yet even today, only two manufacturers are capable of supplying Apple with the ultrathin blue glass filters found in its smartphones. One is the well-known Japanese glass giant Asahi Glass Co. The other, located in Taiwan, toils in relative anonymity a good distance from the island’s main optoelectronics cluster in Taichung.

It is Platinum Optics Technology Inc. (PTOT), based in the Hwa Ya Technology Park in northern Taiwan, just a few hundred meters from the headquarters of major notebook maker Quanta Computer.

“There aren’t many manufacturers able to supply filters for high-end [smartphones]. The products they [PTOT] make have a high degree of difficulty, and they have very solid technical capabilities. We’ve worked with them for a long time,” Lin En-chou, chairman of smartphone camera lens supplier Largan Precision, told CommonWealth Magazine.

Though Platinum Optics Technology’s products are commonly used in the high-end devices of major smartphone brands such as Apple, Samsung and Huawei, the company maintains an unusually low profile. It has no plans to go public, and advances by interested institutional investors and media have all been rebuffed.

But PTOT founder and CEO Henry Peng (彭新淼) recently lifted the veil of mystery, or at least part of it, shrouding this optics “hidden champion” in an exclusive interview with CommonWealth Magazine in March.

The Optics World’s ‘Hidden Champion’

Peng graduated from National Chiao Tung University’s Department of Electronics Engineering, where he was classmates with ZyXEL Communications CEO Chu Shun-I and DBTel Inc. founder Michael Mou.

He has a strong background in the mobile phone sector, having worked with America’s second-largest telecom GTE Corporation (before it merged with Bell Atlantic to create Verizon) and then serving as a director on DBTel’s board and as the head of the company’s brand development in China.

But when DBTel posted a massive loss around 2005, Peng left and spent the next 11 years in the optics industry forging his second career.

Today, PTOT has 1,200 employees in Taiwan, and that number could increase to 2,000 after the company’s new plant in Hsinchu is completed later this year.   

Peng would not divulge PTOT’s annual revenues and gross profit, calling the information confidential, but a person familiar with the company’s situation said that because filters have relatively high profit margins, PTOT’s valuation as an unlisted company surely exceeds the “unicorn” threshold of US$1 billion. 

Forging a “unicorn” company in 11 years represents a rather rare achievement in Taiwan’s tech sector, but Peng is not in a celebratory mood. He has seen countless storms and extreme volatility in the high-tech sector, and he has a calligraphy scroll hanging on the wall in his office with the Mencius saying, “One prospers in worries and hardships and perishes in ease and comfort.”

The lessons are there for all to see. PTOT’s new plant in Hsinchu is rising up from an idle factory the company bought in July 2017. It originally belonged to another optics supplier that was at one time part of Apple’s supply chain only to be pushed aside in a few short years by two Chinese manufacturers – lens specialist Lens Technology and cover glass maker Biel Crystal Manufactory.

The lesson to be learned? “The company didn’t move fast enough,” Peng says.

He led CommonWealth reporters on a tour of the company’s facility, and when we arrived at the first floor lobby in the early evening, most of the lights had already been turned off.

“This was learned from Largan Precision,” explains Peng, who knows Lin En-chou well. “The lobby on their first floor is pretty dark. Investing in innovation is important, but ‘cost down’ can endure for a long time.”

  

Making What Others Don’t

After leaving DBTel, Peng still felt the mobile phone market had a good future. But in starting a new venture for the second time in his life, he decided to specialize in key components used in the devices, to make “the smallest components that nobody else does.” He settled on optical materials, and gradually built a technical team.

PTOT was founded in 2007, but operated at a loss for the first three years. It finally turned a profit in year four.

Before Apple came into the picture, PTOT made a wide variety of optical glass products, including applications for medical equipment. Though the volumes were small, the company was able to generate enough revenue to stay afloat.

After PTOT developed “blue glass” technology, Apple heard about it and came calling, hoping to use it in the camera lens for the iPhone 4. But because of its small production capacity limited by both equipment and manpower, PTOT could not satisfy Apple’s sizable demand for components for the tens of millions of phones it sold.

It was only three years later, when PTOT relocated from Xinzhuang to a new factory in Wugu that it accepted an order for iPhone components.

Technology and Art of Glass Melting

Blue glass filters were not a completely new discovery because similar technology was already being used in high-end single-lens camera lenses. Century-old companies Asahi Glass and Germany-based Schott AG, a subsidiary of the Carl Zeiss Foundation, were both optical giants involved in the field.

The challenge came in miniaturizing the filter. To fit in a camera lens for a mobile phone or notebook computer, the filter had to be no thicker than a third of the diameter of a strand of hair without sacrificing the yield rate or optical characteristics.

Today, PTOT is one of two suppliers of blue light filters to Apple along with Asahi Glass. Schott is not part of Apple’s supply chain.

PTOT was able to outdo the German giant because of its glass melting technology and semiconductor-grade production process, along with its foresight in embracing the niche ahead of others.

“Melting glass is a kind of art,” Peng says, and he was able to crack the code of this particular art form because of his strong technical team. 

When he first set up his company, Peng was able to bring in members of a team with more than 10 years of experience whose previous company had just failed. This core group of fewer than five people, along with glass technology experts recruited from all over and the support of international consultants converged to forge the company’s critical glass melting technology.

How it actually works is PTOT’s secret. Peng agreed to take CommonWealth reporters to see the company’s polishing, cutting, and coating lines, but the glass melting operation – the only process on the top floor of the company’s headquarters – was strictly off limits.

The formulation and process to make “blue glass” involves high degrees of difficulty. Printed circuit board materials supplier Co-Tech Develop Corporation, a company backed by Lite-On Technology Corporation Raymond Soong, and Hon Hai Precision Industry, the world’s biggest contract electronics manufacturer, both invested in the field and even poached some PTOT employees, but never delivered results and eventually withdrew from the market.

Quality through Vertical Integration

A senior executive in the industry, who spoke on condition of anonymity, argues that the nature of PTOT’s operation has a lot to do with its success.

The executive explained that overseas blue light filter manufacturers such as Asahi Glass, Schott or Hoya only produce optical materials. Once the glass is melted, the rest of the processing that turns the glass into a filter is done by outside contractors. Only PTOT handles the entire process, from raw material to finished product, in house, the executive said, ensuring that its quality and delivery schedule are not affected by outside suppliers.

ZyXEL Communications’ Chu, a major shareholder in PTOT, used the semiconductor industry to describe the company’s vertical integration.

“It’s like a semiconductor wafer foundry that takes silicon and turns it into a silicon ingot and then wafer. After the glass is melted, it’s cut, just like an ingot is cut into wafers. It’s then coated, organic and inorganic materials are added, and then it’s packaged, just like the semiconductor back-end process,” Chu says.

“I really admire his [Peng’s] vision and plan,” adds Largan’s Lin. “They [PTOT] produce several under-the-radar products, and the more under-the-radar, the higher value they have. They take basic materials and turn them into products, taking them to the cutting edge.”

Moving into 3D

PTOT has recently moved into one of the hottest fields today – 3D sensing.

A Qualcomm executive recently revealed that only two companies in the world – PTOT and U.S. optical technology supplier Viavi Solutions – can produce infrared band pass filters, which are critically important to 3D sensors.

Though the material used in this special filter differs from that found in blue glass filters, the filters’ functions are similar. As Peng explains, they both are positioned between the last lens layer and the sensor as the last line of defense in keeping unwanted light out. The IR filter’s presence increases the accuracy of distance sensors used in facial identification systems or self-driving cars.   

As PTOT’s product line expands, with applications extending from smartphone lenses to 3D sensors and automotive applications, production capacity has become a major impediment to the company’s continued growth.

Five years ago, PTOT’s headquarters relocated from Wugu to the Hwa Ya Technology Park, and it also has manufacturing facilities in Hsinchu and Suzhou, China. In the last two to three months, the company has recruited about 100 engineers to expand and optimize its products and equipment by looking carefully at everything from materials and chemistry to optics, automation and equipment.

Even though the company needs considerable capital to finance its projects every year, Peng refuses to take PTOT public to raise funds.

“Researching and developing materials takes a long time, and there’s a lot of risk. If you’re working on different types of materials at the same time, it involves a major investment of resources. If the company were to go public, we’d have to worry about short-term returns to shareholders, and wouldn’t be able to get the most out of our investments,” Peng explains.

At a time when a growing number of Taiwanese companies in the Apple supply chain are being chased down by Chinese rivals, Peng has dedicated himself to “the smallest” niche products “that nobody makes” to survive and thrive. Therein may lie the secret that could spring Taiwan free from the shackles of China’s red supply chain.

Translated from the Chinese article by Luke Sabatier

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♦ The Making of an Optical Lens Legend
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