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Taiwan's Eco-friendly Industry

Green Is Gold


For Taiwan's top conglomerates, green industry is rapidly becoming the new cash cow. No longer on the fringe, environmental protection is now a critical consideration impacting sales and brand image.



Green Is Gold

By Huang Jing Syuan, Wang Siao Mei
CommonWealth Magazine

Qingdao, China. Red roof tiles and green trees, a blue sky above an emerald sea. Teco Group chairman Liu Chao-kai surveys the Qingdao coastline, with an eye on the viability of a prospective business venture: wind power generation. And the area's seasonal winds have stirred high hopes. The Chinese Communist Party official accompanying Liu on his survey is more explicit, telling Liu that Qingdao's 730 km of coastline are up for grabs.

Liu, who has just sealed a deal to supply 1,000 wind turbines, is ebullient. Teco looks set to use the force of wind to leapfrog from a NT$10 billion enterprise to a NT$100 billion Goliath.

"Wind power generation is really a business opportunity from heaven," Liu tells CommonWealth Magazine. "One wind turbine sells for NT$100 million, so 1,000 turbines is NT$100 billion. With the ongoing global economic downturn, where else can you find a NT$100 billion market?"

Teco is not the only Taiwanese conglomerate taking aim at the global green industry.

With a detailed examination of Taiwan's 40 biggest business conglomerates, it's not hard to see that the curtain has risen on the age of the green giants.

Toward the end of the 20th century, Taiwanese businesses transformed from traditional industries such as textiles and shoes to high-tech and enjoyed an impressive run of growth that lasted more than 20 years. With the turn of the 21st century, local business groups rooted in technology are beginning to turn toward the global environmental protection industry in anticipation of the next 20-year wave of business growth.

So just exactly how fast has growth been in the so-called "green industries" – renewable energy businesses including solar and wind power generation and energy conservation businesses like hybrid automobiles and LED lighting?

Research on sustainable development by the Allianz Group indicates that last year green industries, including both renewable energy and energy conservation concerns, grew 41 percent to US$117 billion. The blazing speed of growth in green industry has now reached twice that of the PC industry and four times that of the microchip industry. It is estimated that by 2016, the global green industry will surge to a value of US$750 billion, or roughly three times the size of today's global PC industry.

This future industry, with a value equivalent to NT$22 trillion, has Taiwanese business groups salivating at the prospects. In order to be first in line to seize market opportunities, local conglomerates are busily forging their abilities in three major areas: green power, group power and global links.

Green Power:Potential Unlimited

"Going green has already morphed from a responsibility to an opportunity," says Acer Computer founder Stan Shih, looking forward to a great future filled with what he calls "green opportunity."

"There are two kinds of green opportunities: the first type of green opportunity is to capitalize on market demand for green products, which is helpful in expanding market share and boosting corporate image. The second is in producing solar cells and energy saving services and techniques," Shih says.

Smart companies like Delta Electronics Inc. are diving in, and seizing both sides of that equation.

At a time when capital and labor costs and other key elements of competitiveness are becoming increasingly difficult to reconcile, "green" is really looking like the new competitive focus for businesses.

A Green Wave Sweeps the World

 The green wave stretches across national borders and industrial sectors, and has permeated every link in the corporate operational chain.

Meanwhile, the world's corporate titans are taking steps to become ever more green. Last year in Texas, Dell Computer's Michael Dell boldly announced that his company would be the world's most environmentally friendly technology company, and set a timetable for going "carbon neutral." The company says it reached that target in August of this year and now saves US$3 million a year in operating costs while reducing carbon emissions by 20,000 tons in the process.

In Taiwan, the blistering tropical sun has the outdoor temperature at the Southern Taiwan Science Park hovering around a sweltering 39°C. An unlikely oasis of green, however, surrounds Taiwan Semiconductor Manufacturing Corp.'s Phase Three Expansion of its No. 14 Wafer Fabrication Plant within the park, which in early August was recognized by the United States' Leadership in Energy and Environmental Design (LEED), a system of evaluating "green" architecture, with its gold standard of excellence, the first structure in Taiwan to be so recognized by LEED.

In addition to a pledge to go carbon neutral, AU Optronics Corp. has gone even further in "green innovation." In early August, the Central Taiwan Science Park Administration Bureau recognized AUO's new 32-inch energy-saving monitor panel with an award for outstanding product innovation. The new flat-screen panel uses up to 50 percent less electricity than conventional LCD panels while reducing the use of mercury in each cold cathode fluorescent lamp (CCFL) by 82 percent. Extrapolating the seven million 32-inch panels AUO ships worldwide each year, assuming an average family watches eight hours of TV each day, it adds up to an annual energy savings equivalent to one-tenth of the annual power generation capacity of Taiwan's Nuclear Power Plant No. 1 while reducing mercury consumption by 440 kilograms annually.

"The words ‘environmental protection' have already gone from a standard to a specification, from a topic of conversation to an issue of importance. Next, however, they will morph into a crucial strategy affecting sales volume and brand image," says AUO president and COO L.J. Chen.

Group Power:Inspiring Group Synergy

The second key to victory on the environmental playing field is a heavy reliance on group power.

"Conglomeratization will be an unavoidable element in the future of Taiwan's business development," Lee Kuen-yao, chairman of the Benq-AUO Group, a conglomerate with a market capitalization of NT$473 billion. He likens conglomerates to aircraft carriers, which surround themselves with other various vessels like patrol boats, frigates, destroyers and torpedo boats to form a fleet structure, the whole of which is greater than the sum of its individual parts.

With a market capitalization of NT$2.3 trillion and sitting solidly atop Taiwan's corporate world, Formosa Plastics Group can be considered a paragon in the proficient use of conglomeratization.

On the back of a surging petrochemical sector, FPG's market capitalization last year swelled for a time to NT$3 trillion. As FPG's Sixth Naphtha Cracker project came online, culminating 54 years of corporate development, FPG conjured from thin air Formosa Petrochemical Corp., a huge corporation with operating revenue and market capitalization exceeding NT$700 billion, and also greatly expanded its Nan Ya Plastics Corp. and Formosa Chemical & Fibre Corp.

In the management of the Sixth Naphtha Cracker facility, however, the group has been consistently moving toward the "escort vessel" of "green opportunity," as with Formosa Sumco Technology Corp.'s production of the silicon wafers required by Nan Ya Technology Corp., another company in the group.

With its listing on the Taiwan Stock Exchange at the end of last year, Formosa Sumco Technology provided an immediate boost of NT$71.2 billion to FPG's market capitalization. Formosa Sumco Technology (FST) got its foot in the door of the solar power industry first by selling its front-end and back-end waste products to solar energy companies. Due to continued sluggishness in the DRAM market and the growing allure of the solar power generation business, however, in August of this year, FST formally began producing silicon wafers for use in solar power generation applications, its shares becoming known as a "solar energy play" in the process.

Green Cash Cow

In fact, those now leaning toward green opportunism are not limited to FPG, with corporate reports indicating numerous Taiwanese business groups are taking aim at the trillion-dollar green market with their investment dollars. Among them, the most enthusiastic investors are those involved in the LED and solar energy industries – amounting to 11 and 10 business groups, respectively. These industries are particularly appealing because they can extrapolate on Taiwan's core technological competencies and bring corporate synergies into play.

Although most remain in the early stages of their investment plans, those who jumped in early have already seen payoffs – most notably Delta Electronics and Tatung Co.

Environmental protection has long been a passion of Delta Electronics Corp. chairman Bruce Cheng. His company began its solar energy research program more than a decade ago. The corporate headquarters' research center is currently continuing its research program on third-generation solar power generation. In late 2004, Delta and the Industrial Technology Research Institute's Materials Research Laboratories joined forces to jointly invest in founding DelSolar Co., Ltd. That investment in first-generation solar technology has already shown clear results, more than recouping the original investment in just three short years.

DelSolar's key personnel are a group of ITRI researchers, each with at least a decade of solar power technology research under their belts. No one, however, had imagined the lofty heights they've now reached.

"I often said they were in for 10 years of hell, but the turnaround was quite sudden," says DelSolar chairman and CEO R.C. Liang.

That example goes double for Tatung Co., which invested in subsidiary Green Energy Technology. GET, which produces silicon wafers, an upstream raw material for the manufacture of solar cells, has seen its market capitalization rise to nearly half that of Tatung itself in its heyday of the 90s, when Tatung was one of Taiwan's historic industrial behemoths. It also helped propel the Tatung Group from 31st in 2006 to its current ranking of 21st in corporate rankings for market capitalization on the Taiwan Stock Exchange.

Aside from solar power, the green movement unfolding within Taiwan's conglomerates also includes numerous investments in energy-saving lighting and LED illumination industries. Perhaps the future will see even more green miracle business stories being written.

Global Links:Opening the Door to Big Profits

Increasingly stringent environmental regulations and a deepening system of division of labor among global industry have all prompted Taiwanese businesses, eager to create their own green miracles, to scramble to establish and deepen their international links.

As the European Union implements its Waste Electrical and Electronic Equipment (WEEE) and Restriction on Hazardous Substances (RoHS) directives, and its new Eco Design Requirement for Energy-using Products (EuP) comes into force next year, manufacturers will have to take into consideration the lifespan of the materials used in their products if they wish to have a presence in the huge EU market.

"The impact of these new directives will surely be big," says ASUSTek Computers Inc. chief quality officer Frank Lin. "Those who are unable to meet the standards for compact size and weight, lifespan and energy consumption will definitely see an erosion of competitiveness."

Consequently, businesses will have to go green and must strictly keep pace with international regulations and various environmental standards. For each personal computer – from production to transport, usage and recycling – for example, the EuP will seek to quantify the degree of global warming induced by the amount acidic byproducts and carbon dioxide emissions and the amount of oil as well as the ecological damage wrought through water used, toxic substances produced and solid particulates emitted. From top to bottom, this ecological guidebook is a searchlight revealing an enterprise's every detail, leaving it nowhere to hide.

Transforming Reaction into Initiative

Aside from reacting to international directives, Taiwanese businesses are also taking the initiative to form strategic alliances with international business to take a bite out of the international green market pie.

One successful example in this regard is Yuen Foong Yu (YFY) Paper Manufacturing Co., Ltd.

Prime View International Co., Ltd., a company within the YFY group, had been quietly engaged in producing e-books for 20 years, but only recently began turning a profit after swimming in red ink for years. One prime factor behind the company's turnaround: linking up with Internet powerhouse Amazon.

E-book technology did, in fact, exist 20 years ago, but outlets for distribution, content, methods of distribution and hardware devices were not yet fully developed, ultimately leading to failure. But after Prime View purchased electronic paper technology from Philips and hooked up with the massive content and distribution capabilities of Amazon, it achieved a complete global linkage. Electronic market survey organization DisplaySearch estimates that by 2015, the market for electronic books will reach US$1.5 billion.

Through forging green power, group power and global links, Taiwanese business can become a green Goliath, continually transforming, growing and innovating by relying on the green.

Translated from the Chinese by Brian Kennedy

Chinese Version: 台灣40大集團搶攻綠色商機