Case Summary –Chi Mei Optoelectronics
Case Summary –Chi Mei Optoelectronics
1. What prompted CMO to diversify from its core petrochemical base? What were the risks involved?
In the late 1980s, Ho started to think that the future for petrochemicals in Taiwan was not very bright. At that time, he made the first visit to the nascent Hsinchu Science-Based Park where he found that everybody was doing pretty well. Then he began to think diversifying into something. Ho’s good friend Wu had been the principal investigator on the first TFT-LCD research project at the Electronics Research Service Organization (ERSO), part of the Industrial Technology Research Institute (ITRI). ITRI had been responsible for the original technology transfer of RCA’s CMOS semiconductor process from New Jersey to Taiwan. Under Wu, ITRI had begun an investigation of small TFT-LCDs in 1989 and had moved on to three- to six-inch technology in 1990. But unlike what happened with TSMC, the Taiwanese government suddenly cut the budget, leaving ITRI without enough capital to complete the plant’s construction.
Wu suggested to Ho and Shi that manufacturing color filter arrays for LCD flat panels would be a very good move for Chi Mei, but Shi disagreed. But in 1997, the petrochemical industry suffered a severe contraction due to the Asian economic crisis. They asked Mitsubishi who said color filter was good. So Dr. Wu stayed outside for almost one and a half years until the founder decided to approve the plan. In fact, Chi Mei had been tracking the TFT-LCD industry since 1996, as many of the key ingredients used in fabricating TFT-LCD panels were based on materials derived from petrochemicals and were therefore closely related to CMC’s core products. But Shi was skeptical of direct investment because he was not sure whether his company could get a grasp on the core technologies. Shi soon recognized TFT-LCD as a “once in 100-year opportunity for Taiwan.” But the TFT-LCD industry counted only Japan, Korea, and Taiwan as major producers,
1. What prompted CMO to diversify from its core petrochemical base? What were the risks involved?
In the late 1980s, Ho started to think that the future for petrochemicals in Taiwan was not very bright. At that time, he made the first visit to the nascent Hsinchu Science-Based Park where he found that everybody was doing pretty well. Then he began to think diversifying into something. Ho’s good friend Wu had been the principal investigator on the first TFT-LCD research project at the Electronics Research Service Organization (ERSO), part of the Industrial Technology Research Institute (ITRI). ITRI had been responsible for the original technology transfer of RCA’s CMOS semiconductor process from New Jersey to Taiwan. Under Wu, ITRI had begun an investigation of small TFT-LCDs in 1989 and had moved on to three- to six-inch technology in 1990. But unlike what happened with TSMC, the Taiwanese government suddenly cut the budget, leaving ITRI without enough capital to complete the plant’s construction.
Wu suggested to Ho and Shi that manufacturing color filter arrays for LCD flat panels would be a very good move for Chi Mei, but Shi disagreed. But in 1997, the petrochemical industry suffered a severe contraction due to the Asian economic crisis. They asked Mitsubishi who said color filter was good. So Dr. Wu stayed outside for almost one and a half years until the founder decided to approve the plan. In fact, Chi Mei had been tracking the TFT-LCD industry since 1996, as many of the key ingredients used in fabricating TFT-LCD panels were based on materials derived from petrochemicals and were therefore closely related to CMC’s core products. But Shi was skeptical of direct investment because he was not sure whether his company could get a grasp on the core technologies. Shi soon recognized TFT-LCD as a “once in 100-year opportunity for Taiwan.” But the TFT-LCD industry counted only Japan, Korea, and Taiwan as major producers,