Petroleum prices remain high, and supplies could even dry up in another 40 years. The global warming issue continues to heat up, while coal use, which contributes to massive carbon dioxide emissions, will soon come under restrictions, introducing numerous variables to businesses’ operational equations and changing the face of industry.

Emerging energy businesses are rising to meet these trends, while energy-hungry conventional industry is being forced to change its thinking, seeking opportunities amidst the threats, and reinvesting in the future.

For emerging energy industries, “There are only two options at the moment: to find alternative energy resources and reduce energy consumption,” relates Chung-Wen Lan, director of the Photovoltaics Technology Center at the Industrial Technology Research Institute (ITRI). Among these, solar power and light-emitting diode (LED) technology offer the greatest potential. “Both are irreversible trends, continuing to grow and growing fast. ”

Taiwan happens to sit atop these two profitable business opportunities. Currently the world’s top producer of LEDs, Taiwan’s prospects in solar energy are excellent, offering explosive growth potential.

According to estimates by major German solar company, Schott Solar, the production value of solar-powered batteries will reach 100 billion euros over the next 20 years, with solar power accounting for 25 percent of high-end power usage by 2040.

If solar can become a major energy industry there is still room for over 100 times more growth. “At the moment it’s not a viable energy option,” but optimistically speaking, “it offers great growth potential. If solar can become a major energy industry there is still room for over 100 times more growth,” offers Dr. Simon Tsuo, CEO of Motech Solar.

Growth Potential the Greatest Opportunity

Taiwan already ranks among the world’s top-10 solar battery suppliers. As Chung-Wen Lan explains, solar power is the renewable energy source that dovetails most closely with Taiwan’s trillion-NT-dollar semiconductor and photonics industries, sharing very similar technologies, although solar power is not as technically advanced as semiconductors. Given Taiwan’s status in the global semiconductor and display panel sectors and the human resources available to it, “It’s only a matter of time before Taiwan ranks among the top three in the world in terms of solar energy industry output. ”

Presented with such rich business opportunities, semiconductor giants UMC and Mosel Vitalic and display panel leader AU Optronics have begun taking steps and making plans to develop solar energy.

With production value barely topping NT$30 billion this year, Taiwan’s solar energy sector still has a long way to go before it becomes the island’s next “trillion-dollar” industry (earning at least US$30 billion). In contrast, the current status and future prospects of Taiwan’s LED sector in the global industry are much clearer. “In the energy industry, solar power is a dream stock, but LEDs are the diamond stock,” declares Bin-juine Huang, National Taiwan University mechanical engineering professor and director of the institution’s New Energy Center.

Philips is putting its full efforts into development of LED applications. The company’s LED division forecasts 300% growth for 2007.

Solar Dream, LED Jewell

LED is expected to enter the lighting market by 2010. As of 2006, the global lighting market was valued at approximately 24 billion euros. The US Department of Energy, as part of the US$50 million National Solid State Lighting Project, has placed its might behind LED technology with its draft plan for LED lighting products. “LED offers unlimited potential,” offers analyst Chin Hsun Lin of ITRI’s Industrial Economics & Knowledge Center.

Meanwhile, China – both the most aggressive player in this area and a country facing serious energy issues – has also made LED technology a priority of the central government’s eleventh five-year plan.

Starting this year, China plans to replace all streetlights nationwide with LED lighting. The country’s urban lighting market, which stands at around RMB4 billion this year, is expected to grow by 70 percent per annum over the next two years.

With this in mind, Taiwanese industry is shifting its focus to LED, with such major companies as HonHai, Chimei, AU Optronics, and UMC entering the LED field through reinvestment undertakings.

“Right now everyone is getting into this field,” offers Wen Ko , chairman of WK Technology Fund, which has assembled a team this year tasked expressly to look into LEDs. “We’ve got to seize the LED sector,” says Ko with a touch of bravado.

When you’re a big producer, people can’t help but notice you. This is a good foundation. We’re in a nice position at the moment. Big Market, Bigger Opportunities for Taiwan

On the strength of its tightly vertically integrated industry chain, Taiwan currently leads the world in LED production volume. This accounts for 23 percent of production value – second only to Japan’s 50 percent. Yi-Jen Chan, deputy general director of ITRI’s Electronics Research and Service Organization, relates, “When you’re a big producer, people can’t help but notice you. This is a good foundation. We’re in a nice position at the moment. ”

Although its prospects for the future development of solar power and LEDs are looking bright, Taiwan faces the same age-old challenges – a low investment threshold combined with a high ceiling for profit.

With upstream raw materials in short supply and ready-made downstream production lines available for purchasing, the solar power sector is wide open for anyone to come in and claim a piece. However, two or three years down the road when upstream materials are no longer in short supply, Taiwan’s challenges will come from its pursuers in China, the wars to come over scale and technology, and the margins that no longer hold at a fat 30 percent.

Price wars are also in store for the LED sector.

Setting up two LED packaging and testing plants requires a capital investment of around NT$2 billion, but a vital aspect of the nature of the LED business is that luminous efficiency doubles every year, and prices slide correspondingly as technology advances, so that products only hold 10 percent of their price after a decade.

Apart from the business opportunities at hand in developing new energy resources and new products, as Taiwan’s energy-thirsty industry faces necessary adjustments, “defensive measures” provide numerous avenues for making money.

According to statistics from the World Bank, the carbon trading market was around US$11 billion in 2005. At a compound annual growth rate of 25 to 30 percent, this year the carbon trading market is expected to exceed US$18 billion.

Based on data from the ROC Environmental Protection Administration, industry accounts for 54 percent of Taiwan’s carbon dioxide emissions, with Taipower, China Steel, and Formosa Plastics producing the highest output.

China Steel, Chinese Petroleum, and Cheng Loong have most aggressively taken stock of carbon dioxide emissions and put together the most comprehensive reduction plans. In addition to conserving energy and reducing consumption, they have saved extensively on energy costs and even brought in additional revenue. Examples are China Steel’s slag business and Chinese Petroleum’s dry ice operations.

Preparing in advance for global warming has not only helped these businesses increase revenues, in the future they could even profit from carbon trading.

From solar power and LEDs, to carbon-reduction opportunities for high-consumption industries, Taiwanese enterprises are busily finding ways to cash in on the current business bonanza to be had in beating global warming.

Translated from the Chinese by David Toman

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Chinese Version: 台灣企業　搶賺暖化兆元商機