Bright Outlook Pulls More Taiwan Hi-Tech Makers Into Green Lighting

As global warming continues to becoming more reality than scientific theory, which is still denied by a few hardline skeptics-with the polar ice actually melting faster than ever and extreme weather events battering various locales worldwide as hurricanes and record temperatures become strangely more commonplace, one of the moves made by governments in several developed economies, including Australia, California of the United States, Canada and Taiwan, is to gradually ban the notoriously energy-inefficient incandescent bulb. Such strategy supposedly helps to reduce greenhouse gas emissions that exasperate global warming. Coupled with the proven energy saving merits of LED light, compact fluorescent light (CFL) and T5 fluorescent tube, many Taiwan-based hi-tech manufacturers see a pot of gold at the end of the green-lighting tunnel.

The Taiwan government, aware of incandescent bulb's poor luminous efficacy, aims to reduce electrical generation to lessen the nation's output of greenhouse gases, and has laid out a five-year timetable to rid of incandescent lights from the island beginning this year, with official guidelines to be set out by the end of this year. The move by Taiwan likely takes after California, a state renowned for being at the forefront of socially-responsible action and initiatives, which will replace incandescent lights with energy-saving counterparts across-the-board next year, while Australia plans to do the same by 2010.

Around 22.18 million incandescent bulbs, still the most common lighting in many emerging nations for its cost advantage, in Taiwan burn up sizable electricity on the island: 1.08 billion kilowatt/hours a year. The worst aspect may be the inherent science behind incandescent bulbs, which relies on the filament's resistance-forcing current to glow as light, a terribly inefficient system as 90% of wattage is turned into heat rather than visible light. In a sense, it is better to use a common light bulb to keep bread warm than to read, especially in tropical climates.

Sizable Greenhouse Gas Reduction

The Bureau of Energy (BOE) under the Ministry of Economic Affairs (MOEA) has engineered the plan to do away with incandescent bulbs in Taiwan, estimating that 800 million kilowatt /hours of electricity and 500,000 metric tons of CO2 emissions can be cut a year on the island.

Beginning in 2009, all 7,890 government offices and schools on the island will stop using incandescent bulbs as part of the five-year plan, replacing them with energy-saving CFLs, LED lamps and T5 fluorescent tubes; while all government-owned marketplaces have to replace incandescent bulbs with energy-saving lights by the end of 2009. Moreover, the BOE will work with the Cabinet-level Council of Agriculture (COA) to promote saving electricity in that field.

Taiwanese industry watchers believe banning incandescent bulbs will significantly boost sales of various energy-saving lighting, as well as lure non-lighting hi-tech manufacturers to diversify into the lucrative sector. Most newcomers in the green lighting sector in Taiwan, according to observers, have got off to a running start by partnering with established lighting makers, effectively buffering the impact from crossing over foreign technical thresholds and adapting to new business models.

Buying Into Green Lighting

Optimistic about the market outlook of energy-saving lighting, LCD maker Chi Mei Optoelectronics Corp. recently announced it would buy a 3.4% stake in China Electrical Mfg. Co., Ltd. and a 40% stake in TOA Optronics Co., Ltd., a China Electrical affiliate, for NT$850 million (US$28 million at US$1:NT$30).

Such acquisition will make Chi Mei the primary institutional shareholder of China Electrical, Taiwan's top lighting manufacturer founded in 1955, availing it of board membership at TOA. Fully owned by China Electrical, TOA turns out cold cathode fluorescent lamps (CCFLs) as well as hot cathode fluorescent lamps (HCFLs).

Chi Mei president, J.Y. Ho, says the decision to buy into TOA is based on being able to secure sufficient lamps for its backlight modules, as well as open a door to the green-lighting sector; while China Electrical president, C.G. Jan, notes his company has been aggressively engaging in developing energy-saving lamps, believing the collaboration with Chi Mei would help promote such business endeavor.

Chi Mei has its own CCFL and LED affiliates, whose output are limited to backlight purposes; but China Electrical has been able to apply its CCFLs and LEDs as lighting to meet the increasingly popular green trend.

Some industry watchers believe Chi Mei's acquisitions offers a chance to set up closer ties with LCD rival AU Optronics Corp.(AUO), which holds a 9.07% stake in CCFL maker Wellypower Optronics, whose parent is China Electrical. In other words, Chi Mei and AUO will both have vested interest in Wellypower.

Crossing Over Into Lighting Fixture

Currently the world's No.2 maker of LCD TV inverters and notebook computer keyboards, Darfon Corp. recently crossed over into manufacturing lighting fixtures for CCFLs and T5 lamps by tapping its experience in electrical engineering.

Backed by quality certifications for its lighting fixtures and having landed contracts from Philips Lighting, Darfon turns out lighting fixtures mainly designed for display shelves in retailers. Darfon president K.C. Su estimates the new business to pump hundreds of millions of New Taiwan dollars into corporate revenue by the end of this year thanks to orders from Philips and AU Optronics. The company generated some NT$24.6 billion (US$820 million) in revenues throughout last year.

Su says CCFLs are noted for energy efficiency and durability-lasting as long as 50,000 hours-making them potential lighting products not only for commercial, but also manufacturing and residential settings. He says that CCFL light bars are much less expensive than LED counterparts and hence hold significant cost advantages. However, the company, Su adds, would introduce LED lighting fixtures soon to tap the green lighting market.

Optical-disc Player to Green Lighting

Planning to set up a factory in mainland China to produce green lighting sometime in the second half this year, Lite-On IT Chairman Raymond Sung recently said his company would also open a factory in Indonesia soon to do the same. The company is currently the world's No.2 maker of optical-disc players.

"Energy-saving lighting will become mainstream over the next 10 to 15 years, with LED lamps to be the next wave," Sung says, adding that with more governments enacting laws to promote green lighting, such market will create more profitability.

Sung says that the planned Indonesian factory will produce lamps to keep up with huge demand from Philips, with which his company has entered into an alliance to make energy-saving lamps, noting also that Indonesia is ideal to produce such lamps for its abundant glass and natural gas resources as well as low labor costs.

Lite-On will begin producing energy-saving lamps in September at its mainland China factory in Jiangxu Province, starting to tap a market valued at over an estimated NT$100 billion (US$3.3 billion at US$1:NT$30) worldwide a year. It is the second Taiwan-based manufacturer, following Chuan Shih Industrial Co., Ltd., to open such a factory in China.

Sung says although energy-saving lamps were first introduced around 20 years ago, they did not attract much attention from governments worldwide until recently, when saving energy has become more urgent an issue with apparently concrete proof in the form of extreme weather due to global warming.

Amazing Double-digit Margins

Being simple to manufacture relative to notebook computers and digital cameras, the business of energy-saving lamp production in China, ironically, still commands average double-digit net margins, Taiwan industry watchers estimate.

Currently, production of energy-saving lamps mostly take place in mainland China and Southeast Asia, two regions rich in natural resources crucial to such manufacturing, according to industry specialists.

Sung concedes that producing energy-saving lamps is a way for his company to weather underselling rivalry, which drove the company into full-fledged downturn in 2006. The harsh times abated, however, last year as the company generated earnings totaling NT$1.7 billion (US$58 million), up 156% from a year earlier; while he expects the energy-saving lamp business to further drive up corporate earnings in 2009.

The increasingly popular green lighting market has lured one more Taiwan-based maker to diversify.

Being Taiwan's No.1 and the world's No.5 supplier of CCFLs for LCD TVs since its founding in 1994, Wellypower, by tapping its CCFL expertise, is now the only homegrown manufacturer in Taiwan to make T5 fluorescent lamps for general illumination. T5 is the mainstream light source in Europe for its high efficacy: around 105 lumen-per-watt.

Using Japanese-made, fully automated production line to turn out T5 tubes at about one every two seconds, the company has a yearly capacity of 700,000 units, which are available in 2,700, 3,000, 4,000 and 6,500 Kelvin versions, with plans to double the output by the end of this year under way.

"The demand for T5 in Taiwan has good potential since it has so far taken a minor share of the local fluorescent lamp segment," says Polo Yang, director of Wellypower Optronics Corp.'s CCFL Business Division, whose T5 sales account for around 10% of corporate revenue.

Excellent Market Potential for T5s

Lamp makers in Taiwan estimate that only a few million T5s (5/8" diameter) are sold in Taiwan's fluorescent market, which is estimated at around 70 to 80 million tubes and dominated by T8s (1" diameter) and T9s (9/8" diameter). Industry watchers believe that T5s will soon take up bigger market shares held by T8s and T9s on the island due to higher demand for energy-efficiency and reduced mercury content.

The energy-efficient T5s are already making headway in Taiwan's lighting market, with the Taipei 101 skyscraper and clean rooms at leading chipmakers like Taiwan Semiconductor Manufacturing Co. and LCD makers as AU Optronics having installed such lamps.