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High-tech Urban Ag: Plant Factories

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High-tech Urban Ag: Plant Factories

Source:CW

While food prices soar, Taiwan's veteran technology players are quietly opening farming operations underground, raising vegetable crops and cultivating a new green revolution.

High-tech Urban Ag: Plant Factories

By Benjamin Chiang
From CommonWealth Magazine (vol. 505 )

It has been a year of unpredictable and unfavorable weather.

The world's major food producers – the United States, India and Russia – are crying drought, while Brazil has been plagued with flooding. Buoyed by extreme weather events, global staple cereal grain prices have skyrocketed.

Unfortunately, amidst this, Typhoons Saola and Tembin hit Taiwan in succession during the month of August, sending prices for fresh vegetables soaring and leaving consumers dumbfounded.

The price of a kilogram of cilantro rose eight-fold to NT$390. Even cabbage, ordinarily a little over NT$20 or so for a large head at the height of the growing season, was suddenly selling for NT$100 for half a head.

The age of high food prices has arrived. For Taiwan's technology sector, however, it represents a golden opportunity to transform itself. As Typhoon Tembin wrought destruction on southern Taiwan, a food revolution was underway in a basement off Lane 216, Zhongxiao East Rd. Sec. 4, an upscale Taipei neighborhood where property values are commonly priced in the millions of New Taiwan dollars per ping (about 36 sq. feet).

Dozens of customers jammed the 70-plus ping vegetable market, snapping up NT$49 packages of fresh veggies as the cash register labored to churn out receipts.

"Our prices never waver, and we can't keep up with demand," says Pacific Construction Co., Ltd. president Chang Chi-ming, beaming broadly while surveying a seemingly endless procession of vegetable buyers.

The space where the vegetables are produced is next door to the market, a basement "factory" beneath the streets of the fashionable neighborhood.

Chang's "plant factory" stands behind a glass partition. The high-tech two-level "vegetable field" is brimming with a variety of emerald green lettuce. Dazzlingly bright LED light fixtures blaze down upon the vegetables. The cleansuit-clad high-tech farmers meticulously monitor every aspect of the vegetables' growth process.

"I'm operating an urban agricultural enterprise in a commercial space," Chang explains.

Chang has cleared out pricey commercial space to raise vegetables and is using the plant factories to "add value" to the property. He is also using the food shortage to test a new commercial model.

A wave of corporations is currently panning for gold among the leafy greens, by cultivating green enterprises driven by food production. Such high-profile brands as IBM and Toyota are getting in on the game of plant factories.

Hon Hai Precision Industry Co. Ltd. chairman Terry Gou, Delta Electronics Inc. honorary chairman Bruce Cheng, Kinpo Group chairman Rock Hsu, Lite-On Technology Corp. chairman K.Y. Sung and Everlight Electronics chairman Robert Yeh have all separately taken the plunge into agricultural enterprises.

The combined total output value their businesses represent amounts to more than NT$4.6 trillion, or about one-third of Taiwan's annual gross domestic product. Yet what they're all embroiled in building right now are not more technology plants, but plant factories.

They've married Taiwan's natural agricultural advantages with their own high-tech production power, a "force multiplier," and they've seized upon rising food prices to forge a new kind of business enterprise.

Over the past two years, National Taiwan University's College of Bioresources and Agriculture has become the "promised land" for captains of the technology industry looking to get a foot in the door. The training courses on plant factory operations organized there have been booked solid for the past six consecutive sessions.

Fang Wei, head of the university's Department of Bio-Industrial Mechatronics Engineering has been researching all aspects of plant factories for the past 19 years and is now considered something of a star in the field. His students from the agriculture college are snapped up by technology companies to run plant factories the moment they graduate.

"Early this year Delta Electronics chairman Bruce Cheng brought in a group of more than a dozen ranking company executives for a tour, Fang says, flipping open a thick name card portfolio stuffed with the calling cards of top executives from Taiwan's leading corporations, who have all approached Fang seeking cooperative arrangements.

As early as October of 2010 Kinpo Electronics Inc. CEO Shen Shyh-yong led a similarly large group of Kinpo executives into a meeting with Fang. After hearing Fang's presentation, Shen decided on the spot to proceed with construction of plant factories.

One of Taiwan's older electronics brands, Kinpo Electronics Inc. now hosts two mysterious facilities at its Shenkeng manufacturing campus. No longer cranking out electronics, these have been converted to vegetable production.

The two facilities are capable of producing more than 1,300 bunches of leafy greens per day. They amount to Kinpo Group chairman Hsu Sheng-hsiung's secret garden.

"We're going to expand the operation to Kinpo Group plants all over the world, aiming for self-sufficiency," a staffer at Kinpo Electronics's Shenkeng plant says.

Why are major technology players with annual operating revenues in the hundreds of billions of New Taiwan dollars at a minimum increasingly jumping into the plant factory business generating annual revenues measured only in the millions?

"The technology sector is still clinging to profit margins of two to three percent, but the return on investment in agriculture is in the double digits," Professor Lin Ta-te, assistant dean of National Taiwan University's College of Bioresources and Agriculture says succinctly.

What the tech companies are eyeing is not just the crop of veggies to be produced, but the equipment assets worth hundreds of millions underpinning it.

"Plant factories create a commercial opportunity in the form of 'environmental control systems integration,'" Fang Wei says. "Temperature and humidity, lighting, ventilation, all must invariably rely on computer control."

It is the desire to be first into sales of such hardware systems and not be left out in the cold that is the real driving motivation behind these investments in plant factories.

"Providing full turnkey systems integration services is what everyone is scrambling for," Fang emphasizes. Taiwan stands a good chance to become a major exporter of plant factory equipment and services.

Over the past year, Taiwan's LED manufacturers have encountered ferocious low-cost competition from Chinese producers, with local companies bemoaning plunging prices and a severe excess of production capacity. Upon seeing plant factories that use several massive LED fixtures, local manufacturers seem to have glimpsed a ray of hope in the darkness and have quickly taken to investing in plant factories in a search for a commercial outlet for their products.

Ag Revolution at Breakneck Pace

Exports of plant factory equipment and services may just be a heaven-sent new path to survival for Taiwan's technology companies.

Extreme weather has become the new norm, and relying on nature to feed us is becoming increasingly risky. The use of technology to ensure agricultural production is increasingly seen as humanity's best hope for a "new solution to famine."

As opposed to greenhouse cultivation, plant factories "monitor and control everything in the grow environment from lighting and irrigation to ventilation like row upon row of strictly supervised factory production lines," says Lin Ming-tsun, general manager of the "Vegetables Plant" of Hsinchu.

Simply put, "plant factories" provide an artificially created ideal environment for plant growth not subject to typhoons, droughts or other calamities, which operate year-round producing food.

What's more, by layering the "indoor fields" one atop the other and manipulating the LED lighting cycles, yields can be significantly higher than with traditional farming.

Land productivity ratios for plant factories are high.

"In the same amount of space, a plant factory can yield six to seven times as much as natural farming," Lin says, while losing less than five percent of the water used, making it ideal for development in highly urbanized countries, or countries that are short on water.

According to United Nations statistics, one-third of food worldwide is lost to spoilage during transport. During summer, more than 70 percent of the fresh vegetables consumed in Taiwan are imported, racking up a lot of food transport mileage. In comparison, plant factories are better able to put the "locavore" ideal within reach.

The high density characteristics of plant factories also permit a "sales counter up front, production field out back" operating model. Relatively unused urban spaces like basements can be put to work as hugely productive vegetable gardens. Vegetables can be sold over the front counter while the plant factory continuously cranks out veggies in the back.

With use of plant factories, even metropolises like Taipei can become major "food producing regions."

Over the years, Taiwanese technology companies have managed to forge a flexible, cost-conscious and precise management style to contend with the stringent demands of wily major international clients. These operational capabilities would be well-suited for application in the plant factory business.

Cost control is Taiwan's greatest competitive advantage in the development of plant factories.

According to Fang Wei, LED equipment costs account for about half of total plant factory equipment costs. Japanese LED prices are about three times those in Taiwan, but Taiwanese businesses are most adept at cutting costs.

In Japan, construction of a plant factory with a daily production capacity of 1,000 units of leafy vegetables (about 100 kg) would cost an average of about NT$30 million, not including land costs. Taiwanese companies can build one for just half that cost.

"Plant factories make use of artificial light sources and automated environmental controls; precisely the areas of expertise of Taiwanese technology companies," observes Yancey Hai, the current chairman of Delta Electronics.

Among Taiwanese technology firms, Delta has been the most ambitious in this regard.

Entering Delta's Neihu corporate headquarters, one notices that a small-scale plant factory has been recently added to the second-floor corporate exhibition space. This little farm is Bruce Cheng and Yancey Hai's pride and joy.

"Pick something and you can eat it right away," Cheng says, directing visitors to sample some fresh produce.

Early this year, Delta formed a plant factory R&D group to conduct exhaustive research into how the company's power management, ventilation and LED lighting technologies could be applied to plant growth.

"Here we simulate the temperature, humidity, lighting and even ventilation found in nature," Hai says peering at the less than three meter-long plant factory. "It's all an effort to create the optimal environment for plant growth."

All the electronic components used in the unit are Delta products.

In an old 3,600 square-foot house alongside the Coastal Highway in Hsinchu County's Hsinfeng Township, the "Vegetables Plant" has to date attracted the attention of more than 7,000 visiting technology executives from companies including Hon Hai.

Lin Ming-tsun is the 43 year-old general manager of the Vegetables Plant. Lin, who originally ran a semiconductor products company with operating revenues in the billions, now operates his plant factory as if it were a wafer fab.

"Those of us from the technology sector are quite accustomed to the stringent demands of clients," Lin says.

Meanwhile, deep in the mountains near Wulai outside Sindian, Danny Chen, chairman of Nanobiolight Co., Ltd., is brimming with optimism as he forges ahead with the expansion of his company's plant factory operations.

"What other country has LED, IT and agricultural technologies all at once?" Chen asks.

Chen believes that plant factories will be Taiwan's next superstar industry.

"When you're leaping from the shoulders of a giant, how can you be shorter than others?"

Translated from the Chinese by Brian Kennedy

Keywords:

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