Chunghwa Picture Tubes' Road to LCD Profitability
It is not often that I am asked to wear a clean-room "bunny suit" and a hardhat at the same time. But that is exactly what I was doing in late February as I toured the Gen 6 TFT-LCD plant of Chunghwa Picture Tubes (CPT) in Lungtan, Taiwan.
Calling this plant "new" does not quite describe the situation, and that was the reason for the hardhat. Huge areas of the floor were still empty, major manufacturing equipment was being installed, and the first test panels were not scheduled to come off the fabrication line until June 2005, although Plant Manager Ying-Ming Wu said they were making every effort to push the schedule for the "first good panel" forward. The efforts were impressive. Each day, 4000 workers were involved in constructing the $3.1 billion facility.
I have never been inside a Gen 6 plant before, and the building is immense: 400 m long by 160 m wide by 50 m high, said Chunghwa Picture Tubes Vice President W. C. Chiang. It is large enough to comfortably contain a Nimitz-class aircraft carrier or 12 Boeing 747s.
A Gen 6 or Gen 7 fab is an absolute prerequisite if a TFT-LCD company is going to make 32- or 37-in. panels at a competitive cost. CPT Gen 6 motherglass is 1500 x 1850 mm, and eight 32-in. TV panels can be made on each motherglass. A Gen 6 fab can get a manufacturer into the game, but its competitors are doing the same thing, so there is no competitive advantage – at least not by itself.
All but one of Taiwan's major LCD companies – the "Five Tigers" – lost money in 2004. In a meeting at CPT's Taoyuan facility with Liang-Dau Chen (VP of CPT's TFT Business Unit) and Shih-Tsung Yang (VP, CPT Central Research Institute), I asked how CPT was planning to be competitive and profitable in the future.
Chen said that CPT is doing intensive R&D in new, cost-effective designs. Specifically, Yang is working on a new backlight unit (BLU). Currently, the BLU accounts for 40% of the cost of the LCD system. The new concept will cut BLU cost by 30%, for a cost reduction of 12% on the entire system.
I asked Yang what that design was. He said that "everybody was showing LED BLUs at FPD International last October in Yokohama, but they are too expensive. We thought that what is needed is a method that is affordable now." Yang's solution was to leverage CPT's experience in plasma displays and make a plasma BLU, which is driven with just one inverter. This BLU received its public introduction at FPD Taiwan 2005 in Taipei.
Another cost-saver would be an alternative to current expensive polarizers, said Chen, and CPT has designed an alternative it calls the "x-plate." A substantial cost reduction is possible, he said, and "our tests show that it is suitable for mass production."
Yang added that Gen 6 glass costs x40,000 per sheet, which represents 7–8% of total panel cost (as of February 2005), and CPT is encouraging its main supplier to reduce that cost by year's end. "Cost down is the responsibility of materials suppliers as well as panel makers," he said.
Yang said that "Japanese companies will innovate and develop new technology. Taiwanese companies will focus on manufacturing economies to reduce costs. The entire supply chain exists in Taiwan. We are choosing the same quality at lower prices by selecting suppliers."
In other words, "supply chain efficiency" is a critical factor. Many components and materials for Taiwanese TFT-LCDs are still sourced from Japan. It has been the announced policy in Taiwan to encourage the development of a complete LCD supply chain on the island. One focus of this approach is the expensive matrix color filter (MCF). Starting in May 2005, CPT will manufacture about half of the Gen 6 MCFs it needs in its Yangmei plant.
For television LCDs, the BLU and MCF are the highest-cost items sourced from outside the company, and CPT will start making them internally. Other materials and components will come from other Taiwanese vendors.
I commented that this must be an exciting time for CPT. Chen said, "This is exciting, but tough, very tough." However, he continued, "the efforts we are making will allow CPT to match AUO's cost structure." (He was referring to AU Optronics Corp., Taiwan's largest TFT-LCD manufacturer.)
Yang added, "This is a tough time, but in this industry every time is a tough time. We know how to survive."