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2023-01-03 12:32:11

WASHINGTON – A Thin-Film Transistor-Liquid Crystal Display (TFT-LCD) producer and seller has agreed to plead guilty and pay $220 million in criminal fines for its role in a conspiracy to fix prices in the sale of liquid crystal display panels, the Department of Justice announced today.

According to a one-count felony charge filed today in U.S. District Court in San Francisco, Chi Mei Optoelectronics participated in a conspiracy to fix the prices of TFT-LCD panels sold worldwide from Sept. 14, 2001, to Dec. 1, 2006. According to the plea agreement, which is subject to court approval, Chi Mei has agreed to cooperate with the department’s ongoing antitrust investigation.

TFT-LCD panels are used in computer monitors and notebooks, televisions, mobile phones and other electronic devices. By the end of the conspiracy period, the worldwide market for TFT-LCD panels was valued at $70 billion. Companies directly affected by the LCD price-fixing conspiracy are some of the largest computer and television manufacturers in the world, including Apple, Dell and HP.

According to the charge, Chi Mei carried out the conspiracy by agreeing during meetings, conversations and communications to charge prices of TFT-LCD panels at certain pre-determined levels and issuing price quotations in accordance with the agreements reached. As a part of the conspiracy, Chi Mei exchanged information on sales of TFT-LCD panels for the purpose of monitoring and enforcing adherence to the agreed-upon prices.

Chi Mei, which is based in Tainan, Taiwan, is charged with price fixing in violation of the Sherman Act. Each violation carries a maximum fine of $100 million for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Anyone with information concerning illegal conduct in the TFT-LCD industry is urged to call the Antitrust Division’s San Francisco Field Office at 415-436-6660.

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WASHINGTON - A Taiwan thin-film transistor-liquid crystal display (TFT-LCD) panel producer and seller has agreed to plead guilty and to pay a $30 million criminal fine for its role in a global conspiracy to fix the prices of TFT-LCD panels, the Department of Justice announced today.

According to a one-count felony charge filed today in U.S. District Court in San Francisco, HannStar Display Corporation, based in Taipei, Taiwan, participated in a conspiracy from Sept. 14, 2001, to Jan. 31, 2006, to fix the prices of TFT-LCD panels sold worldwide. According to the plea agreement, which is subject to court approval, HannStar has agreed to cooperate with the department’s ongoing TFT-LCD investigation.

"The Antitrust Division has thus far charged seven companies and 17 executives as a result of its investigation into the LCD industry, and we are committed to vigorously prosecuting corporations and individuals who engage in this type of price fixing scheme," said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.

According to the charge, HannStar carried out the conspiracy by agreeing during meetings, conversations and communications to charge prices of TFT-LCD panels at certain pre-determined levels and issuing price quotations in accordance with the agreements reached. As a part of the conspiracy, HannStar exchanged information on sales of TFT-LCD panels for the purpose of monitoring and enforcing adherence to the agreed-upon prices.

Anyone with information concerning illegal conduct in the TFT-LCD industry is urged to call the Antitrust Division’s San Francisco Field Office at 415-436-6660 or visit www.justice.gov/atr/contact/newcase.htm.

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b. WHEN WE RESPOND TO SUBPOENAS, COURT ORDERS, AND LEGAL PROCESSES, OR ACQUIRE AND EXCERCISE OUR LEGAL RIGHTS. SHOULD ANY DISPUTE ARISE BETWEEN THE USER AND THE WEBSITE, THE USERS AGREE THAT THE TAIPEI DISTRICT COURT OF TAIWAN WILL BE THE JURSIDICTIONAL COURT OF THE FIRST INSTANCE;

A federal grand jury in San Francisco has indicted the largest Taiwanese maker of thin-film transistor-liquid crystal display (TFT-LCD) panels, its U.S. subsidiary and six executives for participating in a conspiracy to fix TFT-LCD prices, the U.S. Department of Justice said Thursday.

The indictment, filed Thursday in U.S. District Court for the Northern District of California, charges AU Optronics with participating in a worldwide LCD price-fixing conspiracy between September 2001 and December 2006. The company, U.S. subsidiary AU Optronics America and the six executives charged all participated in the price-fixing conspiracy, the DOJ said in a press release.

TFT-LCD panels are used in computer monitors and laptops, television sets, mobile phones and other electronic devices. At the end of 2006, the worldwide market for TFT-LCD panels was US$70 billion, the DOJ said. Companies directly affected by the price-fixing conspiracy include some of the largest computer and television manufacturers in the world, including Apple, Dell and Hewlett-Packard, the DOJ said.

According to the one-count felony charge, AU Optronics and its executives agreed to fix prices of TFT-LCD panels during meetings and issued price quotes in accordance with the agreements reached. Executives from AU Optronics and its American subsidiary also exchanged information on sales of TFT-LCD panels for the purpose of monitoring and enforcing adherence to the agreed-upon prices.

AU Optronics, which is based in Hsinchu, Taiwan, AU Optronics Corporation America and six of its executives are charged with price fixing in violation of the U.S. Sherman Act. The maximum penalty for the conviction of a Sherman Act violation is 10 years in prison, a $1 million fine for individuals and a $100 million fine for corporations. The fines can be increased to twice the gain derived from the crime or twice the loss suffered by victims.

In the DOJ’s ongoing investigation into LCD price fixing, six companies have pleaded guilty and have been sentenced to pay criminal fines totaling more than $860 million. Including Thursday’s indictment, 17 executives have been charged.

AU was formed in September 2001 by the merger of Acer Display Technology and Unipac Optoelectronics, according to the company’s Web site. In October 2006, AU merged with Quanta Display to create a company with 17 percent of the world’s large-sized TFT-LCD market.

SEOUL, Oct 30 (Reuters) - South Korea’s antitrust regulator said on Sunday it had fined 10 Korean and Taiwanese thin-film transistor (TFT)-liquid crystal display (LCD) makers, including Samsung Electronics Co Ltd of South Korea and AU Optronics Corp of Taiwan, a total of 194 billion won ($176 million) for fixing product prices.

The Fair Trade Commission (FTC) said other major LCD makers involved in its ruling were South Korea’s LG Display Co and Taiwan’s Chimei Innolux Corp. The total fines, it said, were the largest sum ever imposed in an international cartel allegation case in South Korea.

“The makers, which command a combined share of more than 80 percent of the global LCD market..., harmed domestic consumers’ interests by taking part in the price-fixing plot and raising LCD panel prices,” the FTC said in a statement.

The commission said it had investigated the matter for five years to arrive at its ruling, which followed decisions in the United States and European Union, a reference to previous rulings against South Korean flat panel makers.

The FTC accused the companies of holding regular meetings in Taiwan between September 2001 and December 2006 in order to collude not only in adjusting production volume and supply, but also in fixing prices of the flat panel products used mainly in desktop and notebook computers and televisions.

Samsung Electronics, along with its Taiwanese and Japanese subsidiaries, were fined the largest sum of 97.29 billion won, while its home rival LG Display and its subsidiaries also in Taiwan and Japan followed with 65.52 billion won.

But media reported that LG Display, the No. 2 LCD maker, said it was preparing to take the case to the Seoul High Court. It branded the FTC ruling “unfair” as the five-year deadline for the regulator to fine the company expired in July. ($=1,104 Korean won)

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The powerful 6.4-magnitude earthquake that struck Tainan, Taiwan, on February 6 was a significant intervening variable in the LCD panel market during the off-peak season, reportsWitsView, a division ofTrendForce. Besides causing damages to Innolux’s Gen-5 and Gen-6 fabs, the earthquake is expected to have reduced the capacities of other production facilities in the affected area by about 5~10% for the month. WitsView anticipates that the supply disruption resulted from this earthquake will cause sharp price fluctuations in the panel market in the short term. The price trends will return to their normal patterns in March, when panel fabs in Taiwan resume normal operation after repairs.

Among the large-size applications, TV panels were affected by the earthquake the most. Innolux is the world’s sole supplier of 39.5-inch TV panels, which are made in its two Gen-6 fabs. With the earthquake damaging one of these two Gen-6 fabs, Innolux’s clients switched to larger panels such as the 40- and the 43-inch to avoid supply shortage. This shift in TV panel orders has in turn strengthened and stabilized the prices of mid-size products in the 39.5- to the 43-inch range.

Innolux is also the leading supplier of the 50-inch TV panels, and the earthquake did cause slight damage to its Gen-7.5 fab that produces this product. Nonetheless, the average price of the 50-inch has fallen this month as well, albeit moderately by less than US$5. This limited decline was caused more by the earthquake’s psychological effects on the market than by the reduction of supply.

The earthquake did not disrupt the supply of TV panels sized 32, 49, 55 and 65 inches, so the weak overall demand and lackluster sales of TV sets during the Chinese holidays are still the overriding factors in their pricing during February. The average quoted price of the 32-inch has fallen close to US$50 this month, while the 49- and the 55-inch have also dropped by US$6~8. The decline for the 65-inch are expected to be much greater, perhaps by around US$10~15 at the end of February.

The earthquake did not directly affect the monitor panel production, but Taiwanese suppliers suffered losses in their monitor panel inventories and have shifted some of their capacities originally for monitor panels to make TV panels. In the short term, the supply will be tight for monitor panels sized 18.5, 21.5 and 28 inches. However, prices of the 18.5-inch and the 21.5-inch products will still drop by US$0.5~1 in February since the main suppliers of the 18.5-inch are based in China and there are many panel makers capable of filling the 21.5 orders. The price competition in the larger size segments (the 23-, the 23.6- and the 27-inch) have been fierce, and these products will see a drop of around US$1 this month as well.

Innolux’s Gen-5 fab, which devotes half of its capacity to notebook panels, suffered serious damages during this earthquake. Nonetheless, WitsView expects the slumping notebook demand plus the high inventory level to continue exert a greater downward price pressure on all notebook panels in spite of the impact that the earthquake had on their supply. For this month, the 14-inch and the 15.6-inch TN panels with HD resolutions have seen moderate price decline of about US$0.4~0.5, whereas the average price of FHD notebook panels has fallen by US$0.7 as these products expand their presence in the market. The average price of 17.3-inch TN monitor panels with HD resolution has also fallen by US$0.5~0.6 this month on account of limited demand.

TFT displays are full color LCDs providing bright, vivid colors with the ability to show quick animations, complex graphics, and custom fonts with different touchscreen options. Available in industry standard sizes and resolutions. These displays come as standard, premium MVA, sunlight readable, or IPS display types with a variety of interface options including HDMI, SPI and LVDS. Our line of TFT modules include a custom PCB that support HDMI interface, audio support or HMI solutions with on-board FTDI Embedded Video Engine (EVE2).

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He previously worked at DisplaySearch and Solarbuzz, leading providers of display and solar market intelligence. Mr. Annis is a leading expert in flat panel display research and served in a dual role as vice president of manufacturing research at DisplaySearch as well as at its sister company of Solarbuzz. At DisplaySearch, he was responsible for analyzing emerging technologies, tracking and forecasting flat panel display investments, and researching equipment, materials and process trends. At Solarbuzz, he developed the company"s proprietary polysilicon, wafer and cell manufacturing databases and authored related reports.

Vicki Chen focuses on display materials and components, including new form factors, weight efficiencies, and technological advances in displays. She brings more than 10 years of experience in the flat-panel-display industry.

Vicki worked previously at Chinese firm Sigmaintell Consulting, where she was responsible for research on the mobile phone panel market and value chain. She also worked in new-project development at Taiwan Display, a part of Japan Display. She had her first taste of the flat-panel display industry and its workings as a product planning engineer in charge of the request-for-quote (RFQ) development for mobile phone products for China Brands at Innolux, a TFT LCD panel manufacturer in Taiwan.

Mr. Hiroshi Hayase is a Senior Director at Omdia. He previously worked at DisplaySearch and Solarbuzz, leading providers of display and solar market intelligence. With nearly 30 years of experience in the LCD industry, he brings an unparalleled focus to sales, marketing management, production, product engineering and market research and analysis.

At DisplaySearch, Mr. Hayase served as vice president of small and medium displays. Before that, he was responsible for sales and market research at a Taiwanese LCD panel/module manufacturer, Wintek Japan Corporation. Earlier, he served as sales manager with Applied Komatsu Technology (AKT), where he was responsible for sales of CVD systems to major Japanese panel producers. He also has 13 years of experience in sales management and production engineering across the full range of LCD production processes with Seiko Epson. Mr. Hayase holds a bachelor"s degree in Mechanical Engineering from Shizuoka University, Japan.

Mr. Hidetoshi Himuro is a Director at Omdia. He previously worked at DisplaySearch, a leader in primary research and forecasting on the global display market. At DisplaySearch, he served as director of IT & FPD market research. He was responsible for market research and analysis of large-area LCD applications, including monitor, notebook PCs and public display/digital signage. He also forecasted monthly large-area LCD panel pricing. With his background in engineering, he covered the LCD panel technology roadmap.

Prior to DisplaySearch, Mr. Himuro held a number of positions at NEC in both Japan and the US. At NEC, his diverse responsibilities included strategic planning, project management, LCD panel and monitor set procurement, design verification, vendor relationships and hardware development for notebook PCs and LCD monitors and their LCD panels. He has a bachelor"s degree in Electrical Engineering from Tokyo University of Science, Japan.

In his previous roles in the organization, Jusy led the research team on TV technology and ecosystems, which included the panel display market for TVs and large-sized LCDs. He has also worked on the global monitor and public information markets.

Prior to DisplaySearch, he was the product marketing director at Proview Electronics, one of the world"s largest LCD monitor and TV manufacturers. Before DisplaySearch, he experienced as a project team manager at HannSpree, marketing director on e-commerce, and software developer on image processing and multimedia. Mr. Hsieh has a master"s degree with a focus on human-computer interaction and user interface from National Chiao-Tung University, Taiwan.

David Hsieh is a noted expert in research and analysis of the TFT LCD, and LCD TV value chain for Mainland China and Taiwan. As head of the Displays team, he oversees the division’s end-to-end research on displays, covering the supply chain, materials and components, supply-and-demand dynamics, pricing and cost modeling, revenue and shipment forecasts, and emerging technologies.

In an earlier stint at DisplaySearch, he led the company’s primary research and forecasting on the global display market while concurrently serving as vice president of the greater China market. David also worked at HannStar Display, a leading manufacturer of TFT LCD panels, as a key account manager, production planner, and production engineer for the HannStar TFT LCD module line.

Brian Huh is a principal analyst within Omdia. He previously worked at DisplaySearch, a leader in primary research and forecasting on the global display market. At DisplaySearch, he served as a senior analyst for small and medium displays, including emerging displays, touch screen panels and mobile PC displays.

Prior to DisplaySearch, Brian worked at Hydis in South Korea as a TFT LCD module process engineer for five years and as a strategic marketing manager for six years. He is an expert in planning new products and promotions, formulating product and business strategy, and forecasting for mobile PC panels and smartphone displays. Brian has a bachelor"s degree in electronics from Dongguk University in Seoul, South Korea. He speaks both Korean and English.

Nick Jiang is responsible for the research and analysis of the large area TFT-LCD panel industry and market at Omdia. Nick specializes in the Chinese display market. He analyzes the supply chain of Chinese TV panel makers, panel demand from TV brands, and pricing trends, and forecasts the TV panel market in China.

Based in Shenzhen, China, Nick maintains communications with local Chinese TV brands and LCD fabs, following the industry growth and changes. Prior to joining the organization that would become Omdia in 2010, he worked for LG Display as a product strategy planner in China. He also spent some time with a local China television manufacturer, studying products suitable for the Chinese market. Nick received a bachelor’s degree in electronics engineering from Jilin University of China.

Jerry Kang is responsible for the OLED display market analysis at Omdia. His main focus is the AMOLED panel and the next generation display market including flexible and transparent display with AMOLED.

Prior to 2011, Jerry worked as an OLED development engineer at Samsung SDI and Samsung Mobile Display, in charge of operational circuit designing for OLED and LCD.

Before DisplaySearch, he spent three years on the marketing team at Samsung LED (currently Samsung Electronics), leading the display-related LED market team and creating marketing strategies for the company. Prior to Samsung LED, Dr. Kim spent five years at Samsung Electronics working on the R&D team for the LCD business. There, he led several R&D projects on new light sources for LCD backlights and new BLU structures. He earned his Doctor of Philosophy from the School of Materials Science and Engineering at Seoul National University, Korea.

Jeff Lin is a longtime analyst and researcher in the field of displays, having previously worked at DisplaySearch, a leader in primary research and forecasting on the global display market. At DisplaySearch, he worked as an analyst covering Taiwan"s display market and was responsible for market research and analysis of the PC monitor value chain and large-area panel roadmap.

Before DisplaySearch, Jeff gained valuable experience handling panel sourcing and desktop monitor market analysis at BenQ Corporation. Prior to that, he served as a key monitor account sales manager at Samsung Electronics Taiwan, where he formed key relationships with leading PC monitor company and OEMs in the country. Before Samsung, he was an engineer at Chunghwa Picture Tubes (CPT), where he led TV panel development projects and planned TV panel roadmaps.

Jeff earned his bachelor"s degree in environmental engineering from National Cheng Kung University, Taiwan, and his Master of Business Administration from National Chengchi University, Taiwan.

Linda Lin covers large-sized TFT LCD panels and is in charge of survey reports involving the manufacturers and vendors of the notebook panel supply chain.

Linda worked previously at LCD market research firm WitsView, leading the research on panels as well as on downstream products that included monitors and TVs. At the Market Intelligence & Consulting Institute, Taiwan Chief Information and Communications Technology (ICT) market research group, she oversaw regional research for South and East Asia. It was during this time that she decided to make large-sized displays her main focus. Linda has a master’s degree in business administration from National Yunlin University of Science and Technology in Taiwan.

Peter Su conducts research on large-sized displays, tracking supply-and-demand dynamics, market trends, and product roadmaps on panels sized more than 9 inches measured diagonally and used in tablets, notebooks, monitors, and televisions.

Previously, Peter was at DisplaySearch, where he worked with large displays as well. At AU Optronics, he was in panel sales and strategic product marketing in the notebook PC and tablet business units. There, he was also involved in PC capacity planning, technology investment projects, and both upstream and downstream channels for panels and mobile PCs. Peter has a bachelor"s degree in economics from the University of Victoria in Canada, and a master’s degree in business administration from Concordia University Wisconsin in Mequon, Wisconsin.

Mr. Robin Wu is a Principal Analyst at Omdia. Previously he worked at DisplaySearch, a leader in primary research and forecasting on the global display market. At DisplaySearch, he served as a PC and TFT analyst, specializing in trend analysis of China"s PC, monitor, and panel markets. He also acted as vice chair of the VESA monitor task group in 2010 and has focused on monitor/panel standardization since early 2009.

Prior to DisplaySearch, Mr. Wu spent nearly seven years at the leading IT brand IBM/Lenovo. There, he focused on monitor/TFT business, delivering industry-leading green ThinkVision products and managing panel sourcing and qualifications. In addition to providing support to the desktop/AIO business, he acted as a liaison in the industry, building strong relationships with leading PC monitor OEMs in China. Mr. Wu has a bachelor"s degree in Mechanics & Electronics and a master"s degree in Micro-Electro-Mechanical Systems from Huazhong University of Science and Technology, China.

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Suggested Citation:"Appendix A3: Taiwan"s Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.

Taiwan’s Industrial Technology Research Institute (ITRI) is a not-for-profit research organization established in 1973 to provide applied industrial research for Taiwanese industry. ITRI draws upon research conducted all over the world in companies, research organizations and universities and uses the knowledge to develop product prototypes and the processes, equipment and materials necessary to manufacture those prototypes. It fosters not only the creation of companies that make new products, but of entire industry chains supporting the manufacturing process, including design, materials, equipment, testing, packaging, quality control and applications. ITRI “has played an integral role in transforming Taiwan’s economy from a low-tech, labor-intensive model to a high-tech, knowledge-based industrial core.”1 ITRI’s formation was the most important aspect of a broad national effort to develop Taiwan’s semiconductor industry, a spectacular success which has subsequently driven the growth of Taiwan’s capabilities in computers, lighting, displays, telecommunications, photovoltaics, and machinery.

2Michael Porter defines “clusters” as “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms, in related industries and associated institutions … in particular fields that compete but also cooperate. Michael Porter, On Competition (Boston: Harvard Business School Printing, 1998) pp. 197-198.

walking distance of each other, a proximity which fosters personal interchange and cross-pollination of ideas. NCTU, NTHU and ITRI train large numbers of workers for the industries in HSP; company executives and ITRI officials teach in the two universities; and university professors turn to ITRI for assistance in developing practical applications of new ideas and sit on advisory boards of local companies. ITRI “has been praised as the incubator of Taiwan’s chief executive officers of publicly held companies and talents for industries,” and the same could be said of NCTU and NTHU. 3 The companies located in HSP account for about 15 percent of Taiwan’s GDP, making the park one of the most productive pieces of real estate on earth.4

The creation of ITRI, perhaps the most important milestone in the entire course of Taiwan’s industrialization, was the brainchild of an elite group of highly competent bureaucrats and business leaders, most of them holding degrees in engineering.5 They frequently had extensive experience working for multinational high technology companies and were in a position to apply their practical experience to the development of indigenous companies and industries.6 They were relatively unhindered by political pressure—the Kuomintang Party (KPT), which held a monopoly on political power until 1990, had a tradition of relying on “scientific” government planning when it arrived on Taiwan in 1949, and technocrats “had already won a large measure of independence from party and military control.”7 This pattern was maintained

3As of late 2006 ITRI had cultivated over 60 CEOs and 18,000 specialists for Taiwan’s high tech industries. “ITRI Transforms Into a Value Creator from a Tech Follower,” Taiwan Economic News (October 24, 2006).

4Interview with Han-Ping David Shieh, National Chiao Tung University, Hsinchu, Taiwan, February 16, 2012. In 2007, the Geneva-based World Economic Forum ranked Taiwan in first place worldwide in industrial clustering competitiveness, a distinction “attributed mainly to the effect of the world-renowned Hsinchu Science Park.” “Taiwan Ranks 1st Place in Industrial-Clustering Competitiveness Worldwide: WEF,” Taiwan Economic News (December 26, 2007).

5Eleven of the first fourteen individuals to serve as Minister for Economic Affairs in Taiwan held degrees in engineering or science. K.Y. Lin, Taiwan’s chief economic planner in the 1950s and early 1960s, had a degree in electrical engineering, and of his two assistants, one was a physicist and the other a civil engineer. MOEA’s Industrial Development Bureau, which created ITRI, was dominated by engineers at the time. Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton and Oxford: Princeton University Press, 1990), p. 98.

6Morris Chang, with 25 years of experience at Texas Instruments, is a former head of ITRI and when he moved to set up TSMC, he founded TSMC and “loaded TSMC’s ranks with American-trained managers such as Britt Brooks, Doug Chance (the successive general managers of TSMC) and other international professional manager. Among the managers, most of them are Chang’s former colleagues at TI.” Chang’s “excellent education and work experience established his professional knowledge in the semiconductor industry and contributed to the creation of the focused business model of the pure play foundry.” Similar observations could be made with respect to many members of the generation of leaders which oversaw Taiwan’s economic development. T. H. Liu, S. C Hung, S. Y. Wu, and Y. Y. Chu, “Technology Entrepreneurial Styles: A Comparison of UMC and TSMC,” International Journal of Technology Management Vo. 29 ½ (2005) p. 681. SEMI Oral History Interview, Morris Chang (August 24, 2007, Taipei, Taiwan).

ITRI has deep American roots. Its founder, Y.S. Sun, formulated a developmental strategy for high tech industry in Taiwan based on discussions in the early 1970s with a colleague, Dr. Pan Wen-Yuan, an electrical engineer then employed in RCA’s David Sarnoff Laboratories in New Jersey. The two men determined that Taiwan should develop a semiconductor industry, that acquisition of U.S. technology would be required, and that Chinese engineers working in U.S. technology companies would be an important asset for such an effort.9 RCA trained the first cadre of ITRI engineers in semiconductor manufacturing technology, a number of whom were U.S. residents holding Ph.Ds. from U.S. universities. The Taiwanese development effort was advised by a “Science and Technology Advisory Group” (STAG), established in 1979, led by U.S. semiconductor executives, including Pat Haggerty, former CEO of Texas Instruments and former member of the National Academy of Sciences, and B.O. Evans, former VP for development at IBM.10 Hsinchu Science Park represented a deliberate effort by Kuo-Ting Li, a Taiwanese leader known to posterity as the “architect of Taiwan’s economic miracle,” to replicate the best features of California’s Silicon Valley in Taiwan. 11 HSP’s first director was an American, Dr. Choh Li, formerly a research director at Honeywell in

8In 2006, Taiwan Premier Su Tseng-chang, a member of the KMT’s rival party, the Democratic People’s Party (DPP), visited ITRI, praised the organization for its achievements, and commented that he envied ITRI “because the researchers can commit themselves to professional studies without political interference.” “ITRI Has Contributed Greatly to Taiwan: Premier,” Asia Pulse (May 23, 2006). In fact the DPP tends to view ITRI as a KMT stronghold supporting business interests aligned with that party. Voices within the DPP reportedly suggest that if the government plans to spend money on industries, the funds would be better directed toward fisheries and agriculture.

11Li, a former Finance Minister, consulted with Frederick Terman on how Taiwan could replicate Silicon Valley. Terman served as Dean of Stanford’s School of Engineering and spearheaded the establishment of what is now Stanford Research Park. Together with William Shockley he is widely regarded as the father of Silicon Valley. Similarly, Li, the founder of Hsinchu Science Park, is credited with transforming Taiwan from an agrarian country to a high technology center. “Fred Terman, the Father of Silicon Valley,” Net Valley (October 21, 2010).

Minneapolis.12 Morris Chang, perhaps the most famous person to head ITRI and the founder of Taiwan Semiconductor Manufacturing Corporation (TSMC), holds two degrees from MIT, a doctorate from Stanford and served for over 20 years with Texas Instruments, including time as the company’s CEO. At present, four decades after its creation, a large proportion of ITRI’s total work force still holds bachelors and advanced degrees from leading U.S. universities.

An industry analyst quoted in The Economist observed in 2010 that Taiwan was “the best place in the world to turn ideas into physical form.”13 That fact is substantially attributable to ITRI, which functions as the bridge between ideas and form, or as its managers express it, as a “technology intermediary” serving Taiwanese industry. Its primary function is not research but adaptation and transfer of technology from domestic and overseas laboratories to domestic companies. ITRI is “arguably the most capable institution of its kind in the world in scanning the global technological horizon for developments of interest in Taiwanese industry, and executing the steps required to import the technology—either under license or joint development— and then absorbing and adopting the technology for Taiwanese firms to use …”14 Technology is transferred to Taiwanese industry through a variety of channels, including licensing, patent auctions, co-development arrangements, spinoffs, migration of ITRI personnel to companies, and research consortia and alliances.

Although Taiwan’s National Science Council (NSC) is formally responsible for formulating the country’s science and technology policy, and ITRI is subordinated to the Ministry of Economic Affairs, strategic direction has determined through a consultation process involving foreign experts and ethnic Chinese with relevant experience in multinational companies:

“a distinctive feature of Taiwan’s technology policy making is the extensive participation of overseas technologists, mostly of ethnic Chinese origins, as advisers. Enjoying a varying level of access to the top policy circle, they help policymakers identify the industrial sectors with technological promise,

12Constance Squires Meaney, “Taiwan’s Semiconductor Industry,”: in Joel D. Aberbach, David Dollar and Kenneth Sokoloff, (eds.) The Role of the State in Taiwan’s Economic Development (Armonk, NY: M.E. Sharpe, Inc., 1994) p. 178.

MOEA determines ITRI’s strategic direction in consultation with such experts and ITRI itself. The Technical Advisory Committee (TAC), originally an informal group of expatriate Taiwanese engineers working in the United States, evolved into a standing organization of Taiwanese with international education and work experience advising ITRI on relationships with multinational corporations. 16 The Science and Technology Advisory Group (STAG), which advises the Executive Yuan (cabinet) on science and technology policy, includes international experts (occasionally including Nobel Prize winners) as well as eminent Taiwanese academics and holds an annual Industrial Science and Technology Strategy Conference, which addresses themes in areas such as electronics, telecommunications, information technology and

15Chen-Dong Tso, “State-Technologist Nexus in Taiwan’s High Tech Policymaking: Semiconductor and Wireless Communications Industries,” Journal of East Asian Studies (May 2004).

biotechnology.17 STAG prepares developmental technology blueprints for specific industry sectors regarded as important.18 The Technical Review Board (TRB) of the National Science Council consists of foreign and domestic experts who concentrate on targeting particular technologies and adapting them at the operational and project level. A number of key Taiwanese experts have served in more than one capacity in such organizations.19 This multifaceted and cosmopolitan advisory system has been widely praised, but has fostered failures as well as successes.20

17STAG was at one time headed by Frederick Seitz, former president of the U.S. National Academy of Sciences. “STAG Provides Policy Suggestions,” Taiwan Today (June 15, 2001). “The Science and Technology Advisory Group Must Take its Job Seriously,” United Daily News (Taipei, November 13, 2009). Arthur Carty, a Canadian nanotechnology who was invited to join STAG in 2008, recalled in 2010 that in a recent week-long STAG meeting, “government officials, industry professionals, research and development experts and academics reviewed and discussed a number of investment proposals before throwing out the bad ones. We don’t have anything like that in Canada,” Carty said. “Taiwan’s Technology Success Underappreciated: Canadian Scientist,” Focus Taiwan (July 24, 2010).

20Based on advice from STAG, in 1982 the Taiwanese government decided to place a priority on the development of a biotechnology industry. Major financial and institutional commitments were subsequently undertaken. Today, thirty years after this effort began, it is not at all clear that the modest results achieved to date represent an adequate return on Taiwan’s major investment. See generally Yu-Shan Wu, Academia Sinica, “Taiwan’s Developmental State: After the Economic and Political Turmoid,” Paper prepared for delivery at the Conference on A Decade After the Asian Financial Crisis, Thammasat University, Bangkok, February 23-24, 2007, p. 22.

23Min-ping Huang, “The Cradle of Technology: the Industrial Technology Research Institute,” in Terence Tsai and Bor-Shiuan Cheng (eds.). The Silicon Dragon: High Tech Industry in Taiwan. (Cheltenham, UK and Northampton, MA: Edward Elgar, 2006) pp. 27-28. ITRI undertook a fundamental restructuring of its organization in 2006 with an eye toward “silo-breaking” among its research laboratories, which were seen as competing with each other for resources and not collaborating sufficiently. ITRI’s eight core laboratories were reduced to six through the merger of its semiconductor and optoelectronics labs and its materials and chemical labs. “Technology centers” were established and tasked with integrating the work of multiple ITRI core laboratories.

In ITRI’s early years it relied almost entirely on the acquisition of technology and know-how from foreign high technology companies, which it disseminated to Taiwanese industry. In recent decades the research capabilities of Taiwan’s universities, including the Hsinchu-based National Tsing Hua and National Chiao Tung Universities, have emerged as increasingly important sources of technology. As ITRI’s reputation as an R&D powerhouse has grown, it has become possible for the institute to enter into joint R&D projects with first-tier foreign companies and research organizations. 26 Technology obtained via such collaborations remains a vital aspect of ITRI’s operations.

24Private sector income is derived through activities such as sale of intellectual property to industry, provision of knowledge-based services to industry, other forms of technology transfer, and royalty payments. ITRI’s budget has not grown for many years despite pleas from industry to MOEA to increase ITRI’s funding. Interview with John Chen, Director, ITRI Display Technology Center, Hsinchu, Taiwan, February 14, 2012. Interview with Taiwanese semiconductor executive, Hsinchu, Taiwan, February 15, 2012. ITRI’s budget is subject to periodic public pressure based on the perception that it is channeling public resources to companies and industries that are already mature and do not need public assistance. In 1994, ITRI’s budget was cut in half by the Legislative Yuan based on such criticism. Douglas B. Fuller, Globalization for Nation Building: Industrial Policy for High Technology Products in Taiwan (MIT Working Paper MIT-IPC-02-002, January 2002), p. 12.

25Interview with Taiwanese semiconductor executive Hsinchu, Taiwan, February 15, 2012. ITRI recruits employees by offering them a good work environment, a large working team, and excellent career development prospects. Taiwan’s system of compulsory military service has served as a major source of educated personnel for ITRI. The Ministry of National Defense assigns 400 soldiers to ITRI annually, of which 70 percent are graduates of the leading universities in Taiwan. Only 10 percent of Taiwan’s soldiers are qualified for assignment to ITRI. They serve at ITRI for at least four years as an alternative to active military duty. Terence Tsai and Borshivan Cheng, The Silicon Dragon: High-Tech Industry in Taiwan (Edward Elger, 2006) p. 32. Taiwan has had a system of compulsory military service since 1949. Alternatives to active duty military service include “national defense service,” which is available to draftees with advanced degrees, particularly in engineering and the sciences. Qualified individuals who choose this option receive three months of officer training and a commission in the reserves, followed by four years of work in a government or academic research institution such as ITRI or Academia Sinica. Annual turnover is extremely high, averaging about 10 percent but in some divisions rising to 15-20 percent, posing a continual challenge to management. Interview with Mao-Jian Wang, National Tsing Hua University, Hsinchu, Taiwan, February 16, 2012.

26A number if ITRI’s foreign collaborations involve establishment of a research center on ITRI’s premises by the foreign partner. “Festo Inaugurates Automation Parts Engineering Center at ITRI,” Taiwan Economic News (February 9, 2004); Corning operates a research center within ITRI on glass technology including bendable glass. “Corning Inaugurates Research Center in Taiwan,” Asia Pulse (March 13, 2006). In a recent and significant example of technology acquisition from abroad, ITRI’s entry into the field of flexible electronics (bendable electronic devices and displays) was made possible by friendly technology transfer from Eastman Kodak Company to ITRI. Dr. John Chen,

SOURCES: “ITRI, Intel Announce Research Project,” Taipei Times Online (December 7, 2011); “ITRI Signs MoU with LBNL on Renewable Energy Technology Development,” Taiwan Economic News (August 11, 2011); “Corning Inaugurates Research Center in Taiwan,” Asia Pulse (March 13, 2006); “Microsoft Launches Windows Engineering Center in Taiwan,” China Post (September 10, 2005); “ITRI, Israeli Firm to Build WiMAX Testing Lab,” Central News Agency (February 9, 2010); “Taiwan Institute to Cooperate with U.S. Firm in Carbon Fiber Research,” Central News Agency (July 17, 2009); “HP Sets Up First RFID Center on the Island,” China Post (April 14, 2004); “ITRI to Spearhead Green Energy and Biotech Research,” Taiwan Economic News (September 7, 2009); “Novartis Signs Five Year Cooperation MoU with MOEA,” Taiwan Economic News (January 11, 2008); “ITRI and Applied Materials Team Up on 3DIC Technology,” ITRI Today (4th quarter 2009).

currently the Director of ITRI’s Display Technology Center, held numerous R&D managerial positions at Kodak between 1982 and 2006. Kodak, which had developed technology for large area roll-to-roll (R2R) fabrication of flexible displays, gave up on commercialization and sought to sell the technology “to someone who was competent,” eventually selecting ITRI. Chen led an ITRI team to Kodak’s labs in Rochester where a Kodak delegation worked with them to facilitate the technology transfer, which included transfer of equipment. ITRI’s subsequent development of R2R manufacturing processes for flexible displays was “all based on Kodak technology” but now exceeds the highest technological levels reached by Kodak. “This was the beginning of flexible displays [in Taiwan].” Interview with Dr. John Chen, Director, ITRI Display Technology Center, Hsinchu, Taiwan, February 14, 2012.

Material, Chemical and Nanotechnology Research Laboratory: ITRI’s Material, Chemical and Nanotechnology Laboratory collaborates with Taiwanese companies to develop materials and components for application in the fields of electronics, green energy, optoelectronics, and panel display. In addition, it develops high-tech

30In 2011, a research team from the laboratory won an Angel Business Communications; (ABC) Solar Industry Award, the first Asian laboratory to achieve this honor, for development of a “green energy antenna.” This device “integrates antenna transmission and solar panel power storage technology, simultaneously improving the conversion efficiency of solar energy optoelectronics and the efficiency of antenna reception and emission.” ITRI has reportedly secured international patent rights for the technology and is seeking “international cooperation partners for technology transfer.” According to estimates, application of the new technology at a 3-G base station with power consumption of 500W could product about 30 percent supplementary power mitigating peak hour power consumption and relieving the load on the power grid. Lillian Lin, “ITRI’s Green Energy Atenna Technology Wins Solar Industry Award” Central News Agency (September 7, 2011). This lab has developed carbon capture and storage (CCS) technology jointly with Taiwan Cement Corp. which reportedly cuts the cost of carbon capture from the current international level of over $45 per metric ton to under $26 per metric ton. “Taiwan Unveils Microalgal Biofuel Technology,” Central News Agency (October 2, 2010). It has also developed processes to transform microalgae into biodiesel fuel. “ITRI Wins Prominent Display Technology Award from Industry Group,” Central News Agency (May 19, 2011).

Mechanical and Systems Laboratory: ITRI’s Mechanical and Systems Technologies Laboratory develops technologies to assist Taiwanese companies in the areas of precision manufacturing, green energy and intelligent automation.

Medical Device and Biomedical Technologies Laboratories: ITRI’s Medical Device and Biomedical Technologies laboratories are performing research to create and expand a biomedical industry in Taiwan that will develop products according to the “biomedical 3Ps (preventive, predictive, personalized).

ITRI research projects are aimed at the development of technologies that can be commercialized, and involve the creation of specific product prototypes. ITRI’s main site in Hsinchu, Taiwan displays scores of recent product prototypes that have emerged from its laboratories, including a number that have won international R&D awards. In most cases, the commercial potential of these prototypes is readily apparent.

The technology centers coordinate and integrate research and technology obtained from various ITRI core laboratories, foreign partners, and Taiwanese industry. They have discretionary funds with which they can commission R&D in the core laboratories. At present, ITRI’s Display Technology Center (DTC) is performing work on flexible displays which integrates the research efforts of five separate ITRI labs as well as technology licensed from foreign companies. DTC Director John Chen observes that “we are the program office or integrator … we have the fab here so we can concentrate on process integration strategy. We don’t work on materials, we rely on our colleagues [in ITRI’s Material, Chemical and Nanotechnology Research Lab] to develop the materials we need.”33 DTC’s main facility is a 3,124 sq.m second generation laboratory pilot line (glass substrate size 370x470mm2) which has been used to produce flexible 20-inch thin film transistor liquid crystal displays (TFT-LCDs).

DTC commonly engages in contract services, joint R&D, technology transfer, cross-licensing, and evaluation and verification of customers’ flexible displays materials, equipment and systems. It is currently partnering with local Taiwanese companies to establish the foundation for a complete industrial chain for the manufacture of flexible electronics products.34

The biggest strength of ITRI is the multidisciplinary cooperation. We create a complete manufacturing supply chain in its early stages. That is the secret. Then you can scale it up, then you have a complete supply chain for the industry. So DTC does not just work with display companies, but also materials suppliers and equipment makers.35

Decades of application of this holistic approach has transformed Taiwan into a major manufacturing center for electronic information products. Barry Lam, former head of Kinpo Electronics and founder of Quanta Computer, commented about the Taiwanese IT industry chain in a 2011 oral history interview:

The supply chain is very complete in Taiwan. We have semiconductor foundries here in Taiwan. We have good design houses. We have many good assembly houses. We also have many components, such as CD-ROM drive. We gave up on the hard drive business at the time, so we didn’t catch the momentum when the industry was blooming. Assembly was done mostly in Thailand or Southeast Asia. We pretty much know how to make most components in mass production. So from components … that’s why even when we make resistors and capacitors, our price is still very cheap. For components, from PCB boards to chips, we can make it

all in Taiwan. So, we can even complete the design in Taipei. And, why? Because all the vendors are concentrated in Taipei. Taipei is not big, so it’s easy to deal with everything in Taipei and everything can be done here. This is good, isn’t it?36

ITRI’s technology is transferred to Taiwanese industry through numerous channels. ITRI research organizations participate in a large number of topical R&D alliances designed to ensure that the participating companies follow, monitor, and in some cases participate in ITRI research projects in a manner which enhances the prospect they can successfully absorb and apply new technologies. 37 ITRI licenses technology to domestic companies, frequently on more favorable terms than could be obtained from foreign sources.38 It performs contract R&D for companies.39 Since 2005 it has auctioned off blocks of intellectual property on an exclusive basis.40 ITRI’s OpenLab is an incubator for new companies which provides facilities, utilities, business services and research support to start-up companies—in 2005 OpenLab was honored as the “best incubator in Asia” by the Asian Association of Business Incubation.41 Among other services ITRI offers pilot production opportunities to companies prior to the commercialization of products, which enables companies to use ITRI’s pilot lines for process verification, product development and semi-commercial production. The newly-formed ITRI College provides customized training programs for Taiwanese companies, as well as government officials and researchers from developing countries in

37An important aspect of ITRI’s industry-coalition building is organizing member companies to specialize in specific developmental areas so they do not duplicate effort. In 2003, for example, ITRI formed a “SIP alliance” with twelve of Taiwan’s leading information technology firms pursuant to which they would share their silicon intellectual property, an initiative that arose out of the recognition that many local IC design houses were doing the same work. “From the government’s point of view, this is a waste of resources,” an MOEA spokesperson commented. “12 Top IT Firms Form SIP Alliance,” China Post (April 9, 2003).

38In 2006, ITRI’s Electronics and Optoelectronics Research Laboratories licensed indium tin oxide transparent electrode technology to nine Taiwanese producers of light-emitting diodes (LEDs) on terms that “would help the island’s LED makers pare their spending on intellectual property licenses from foreign sources.” “ITRI Lab Licenses Advanced Electrodes to LED Makers,” Taiwan Economic News (July 7, 2006).

innovation competencies and six technological areas.42 Finally, former ITRI employees taking positions in Taiwanese high tech companies bring extensive know-how and in some cases, technology which they are expected by their former employer to commercialize.

43A recent example of a spin-in arrangement is the 2008 formation of Hi-Tech Energy Co to produce lithium batteries. Hi-Tech Energy is a joint venture between ITRI and Taiwan’s Welldone Co., a producer of batteries. The joint venture was “led by a team of ITRI specialists.” R&D at the joint venture was to be led by Yang Mo-hua, “an ITRI battery export.” “Taiwan Spearheads Lithium-Battery Module Effort,” Taipei Times (May 15, 2008).

45ITIC was established in 1979 as a wholly-owned subsidiary of ITRI to facilitate the development of high technology industries and the upgrading of traditional industries. ITIC was established because at the time Taiwan lacked a venture capital industry. ITIC provided capital to a number of Taiwanese companies that were spun off by ITRI, including United Microelectronics Corporation (UMC), Acer Display Technologies (Now AU Optronics), and Taiwan Mask Corporation. ITIC currently provides funds to over 50 companies and operates an incubation center with 30 start-ups representing various high tech sectors. As of early 2012, ITIC had four funds supplying venture capital to start-ups. ITIC has a staff of 23 professionals, half of whom have ITRI backgrounds and half previously held positions in industry. Twelve individuals comprise ITIC’s venture capital team. Interview with Ching-Jiunn Chang, Vice President, ITIC, February 13, 2012.

SOURCE: “Taiwan to Roll Out High-Speed Spindles for High End Machines Tools,” Taiwan Economic News (November 21, 2005); “Mosel Vitelec, ITRI Set Up Venture Firm to Tap into RFID Market,” Taipei Times (November 8, 2006); “Gene Chip Venture Phalanx Inaugurated,” China Post (January 24, 2003).

ITRI’s contribution to Taiwan’s industrial development has been substantially enhanced by its physical presence in a technology cluster in the Hsinchu area. Innovation or technology clusters are concentrations of knowledge-based companies pursuing research, development and production of advanced technology products in proximity to each other. The most successful clusters draw upon nearby universities for talent and research, and benefit from

49Characterizing Toshiba as an “umbrella” and a “shield,” Pua states that “Toshiba was the ‘door deity’ that protected us from the outside world,” Pua (2012), Driven to Success, (2012) op. cit. p. 40. Toshiba has been investing in Taiwan since the 1950s, when it acquired a five percent equity stake in Tatung Co., which was then Taiwan’s only integrated electronics company. Toshiba licensed technology to Tantung, enabling the company to develop competencies in high-end compressors, CRT picture tubes, and LCDs. Today, Tantung is a diversified multinational corporation producing consumer electronics products.

Taiwan’s Hsinchu technology cluster has evolved into one of the most productive in the world. According to a recent estimate firms located inside HSP are 66 percent more productive than firms located outside.52 In 2010, 139,416 people were employed in HSP itself.53 At the end of 2010, HSP contained operations of 449 companies which generated over $40 billion in that year. The semiconductor industry was dominant in terms of percent of total revenue.54

52John A. Mathews, “The Hsinchu Model: Collective Efficiency, Increasing Returns and Higher- Order Capabilities in the Hsinchu Science-Based Industry Park, Taiwan,” Keynote Address, Chinese Society for Management of Technology 20th Anniversary Conference, Hsinchu, Taiwan, December 10, 2010.

Suggested Citation:"Appendix A3: Taiwan"s Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Cen

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