Auto electronics is destined to be one of the very top global-growth industries of the future. The year 2005 saw the auto industry gross output value reach US$630 billion—the greatest in the world, far outstripping the US$120 billion gross output value for the PC industry and US$216 billion for the mobile phone industry. Electronic components currently comprise 20% of gross industry output, at US$122.4 billion, and are expected to grow to 35%, or US$163.4 billion, in 2008.

Located in Taoyuan County, Actron Technology Corp. is the only manufacturer of vehicle generator diodes in Taiwan, and holds a 20% global market share. Between 2002 and 2006, Actron's business grew by 450%, and its gross margin increased from 21% to 39%.

Rectifier diodes are essential to engine ignition. They are a core auto electronics component that is difficult to manufacture and subject to a closed market with unbelievably high client expectation.

In 2002, production lines were shut down for six months at the beginning of Actron's venture, due to a dip in production yield from 99.9% to 99.8%. “They didn't see it that way – from their point of view, the defect rate leaped from 1000 parts per million to 2000, and they shut us down,” says Actron president David Hsieh.

A single vehicle engine requires a unit of six rectifiers; each Actron-manufactured unit is further processed upon delivery and must withstand a stamping load of 600kg. The product is deemed defective should one rectifier give or the unit be unable to withstand the 600kg load. “That's nearly impossible! If I say they did not apply the weight correctly, they tell me my product is inferior, badly designed, and not robust enough,” Hsieh reveals.

Feeling something was abnormal but unable to detect the cause, the client shut down production immediately. Before production could be resumed, eight representatives were sent to inspect and sign-off on each stage of production, and Actron needed to organize data on R&D, quality control, the manufacturing process, and the final product to convince them to do so. This was a difficult time for Hsieh, who sustained monetary losses on all raw materials as well as six months of production. “It almost drove me insane,” he recalls.

To a man who worked 18 years at Texas Instruments (TI) with 400 engineers under him, this was almost inconceivable. When Hsieh had just started working in the auto electronics industry, the first time a client came for an inspection tour, they gave him a score of just 67. “What really got me was that I'd put in over a decade at TI, where everyone thought we were better than Motorola. In terms of quality and cost, if we didn't have superhuman powers, we were certainly extremely talented. Running this tiny factory was a cakewalk, and they gave me 67 points?” Hsieh exclaims.

When they finally decided to order from Actron, the client sent three examiners, who stayed three whole days per visit. “You think the French are romantic? Brutal is what they are,” said Hsieh.

The three engineers visited Taiwan a total of 15 times, and each visit saw meetings lasting until midnight. They would scrutinize and discuss, in French, a single step of the production process for an hour at a time. At each meeting, the three would prepare a long list of shortcomings filling the entire whiteboard. The basic concept of the auto industry is diligently drilled into each and every engineer – in the production process, quality risks cannot exist from one step to the next – one well-oiled step does not excuse latent risk in the next.

No one else in the electronics industry is exacting to such a degree: “We did not design each stage of the process from a 0% risk perspective,” says Hsieh. “No one in the industry does that.”

Promoting 5S

The need to meet the auto industry standard had Hsieh engaging in hands-on company reform, promoting 5S – a Japanese business watchword, standing for seiri (organization), seiton (order), seiso (neatness), seiketsu (cleanliness), and shitsuke (good manners). Hsieh explored the most efficient methods and practiced them until he became an expert. This effort continues today, and client authentication certificates hanging on the wall serve as reminders of its importance.

“A high gross margin cannot be independent of quality. Quality is essential, or you couldn't possibly attain that level of gross margin and compete internationally,” Hsieh asserts.

Actron continues to work toward upstream integration and the production of modular rectifiers. As Wang Cheng-chien, manager of the Automotive Research & Testing Center Planning and Promotion Department, explains, Actron's efforts toward integration and expertise will yield greater revenues by going modular, and original IC design will help it to maintain its gross margin – a smart strategy. With a wealth of opportunity to set new record highs in the future, Actron is an express enterprise to watch.

Translated from the Chinese by Ellen Wieman

Chinese Version: 朋程 拚出百萬分之一的嚴謹