Taiwanese government officials consider Taiwan's primary strengths to be in electronics manufacturing. While Japan has been Asia's benchmark in electronics' R&D, design, manufacturing, marketing, and sales, Taiwan has been strongest in all areas of computers and in component technologies. According to a 1993 study (BCG 1994), Taiwan is relatively weak in consumer and telecommunication products (see Table 2.7, Chapter 2).
Taiwan developed its electronics manufacturing capabilities over the past four decades (Table 5.3). In the 1960s, Taiwan assembled such products as transistor radios, tape recorders, and some transistor packaging. In the 1970s, Taiwanese firms entered the component manufacturing business with CRTs, IC pilot production of ICs (via ERSO), electronic watch production, and VCR magnetic drum developments. In the 1980s, Taiwan entered into computer manufacturing with United Microelectronics Corporation's (UMC's) semiconductors, the IBM-compatible PC, 256K DRAM development, color monitor production, and establishment of Taiwan Semiconductor Manufacturing Company (TSMC). Electronics became the number one export and Taiwan became the fifth-largest supplier of PCs. In the 1990s, Taiwan moved into microelectronics manufacturing and became the number one supplier of motherboards, monitors, scanners, and mice. In 1995, Taiwan became the number three supplier of computers, with a value of $19.7 billion. In 1995, Taiwan produced $3.3 billion in semiconductors, began mass production of 16 Mbit DRAMs, and opened four of 20 planned 8-inch wafer fab operations. Today, Taiwan is targeting the markets for semiconductors, optoelectronics, displays, and packaging.
Taiwan's government decided to get out of electronic games and toys, considered intellectually unhealthy for children. As Fig. 5.2 shows, the shift into computers and related components has been extremely successful. While communications electronics has remained a small proportion of output, it is targeted as an emerging growth industry for the future. Consumer electronics fell from 30.9% to 7.3% of Taiwan's electronics output between 1986 and 1995; information products grew from 22.8% to 33.8% during the same period. Related electronic components also increased from 38% to 53.4%.Table 5.3
Source: ERSO/ITRI ITIS Program
Fig. 5.2. The changing structure of Taiwan's electronics industry (ERSO/ITRI ITIS Project).
In 1983-84, ERSO and local companies launched a project to shorten the product development cycle of IBM-compatible PCs. The first commercial products took 12 months to develop, provided the model for rapid product development, and enhanced the global competitiveness of Taiwan's information products. Since then, other computer-related product development consortia have included printers, Winchester disk drives, notebook PCs, SPARC workstations, handheld PCs, submicron SRAM and DRAM semiconductors, and CAD magnetic circuit design prototyping. Fig. 5.3 shows the growth in computer output and the time required for product development. While China is a growing source of motherboards and desktop computers, Taiwan continues to be a major supplier of notebooks. By 1997, Taiwan's worldwide market share of notebook PCs is expected to reach 38.7% and 8.9% for desktop PCs.
Fig. 5.3. Taiwan's computer development (ERSO/ITRI ITIS Project).
Taiwan's leading PC makers are now primary suppliers to original equipment manufacturers (OEMs) like Compaq, IBM, Apple, Packard Bell, NEC, AST, and Dell (Table 5.4). The speed with which Taiwanese computer makers can now design and deliver advanced PC notebooks makes them a major source of original notebook PC designs. Inventec designed and produces Compaq's high-end LTE 5000 series of notebook computers, and it began producing Apple's Newton in 1992 using Apple's latest tape automated bonding technology to miniaturize the Newton's motherboard. Most recently, it has designed and produced Compaq's new personal digital assistant (PDA). Inventec considers itself a 100% original design manufacturer (ODM) because it produces only products that it designs. GVC supplies about 60% ODM products to firms like Packard Bell and NEC. It targets the top-ten PC companies as its primary customer base for ODM products.Table 5.4
Taiwan can now supply all of the components for the computers it assembles, except hard disk drives. Table 5.5 shows Taiwan's success in moving into critical component areas. By 1995 monitors had become a $7.2 billion business for Taiwan, with a world market share of 57%. Taiwanese companies held 65% of the world markets in motherboards and keyboards, 64% in scanners, 38% in network cards, 35% in power supplies, 32% in graphic cards, 27% in portable PCs, 11% in CD-ROMs, and 72% in computer mice. The time required for Taiwanese companies to introduce new models has fallen sharply: it took them 3 years to introduce their first IBM-compatible 286 computer in 1985, but it took them only two months to produce their first Pentium-based system in 1993. By 1996, most Japanese firms were outsourcing notebook computers to Taiwanese firms.Table 5.5
Figures include offshore production; Source: Market Intelligence Center
Taiwan's electronics infrastructure is outlined in Fig. 5.4. With over a decade of experience in printed wire or circuit board assembly and total systems fabrication, electronic packaging is a core competency of Taiwan. Taiwan has been adding IC packaging, IC wafer fabrication, and LCD assembly to its capabilities.
Technology Development Strategy
ERSO's strategy is to develop key devices, components, and related process technologies essential to information input, signal processing, and output of information. Process developments are required for CCDs (charge-coupled devices) and RF IC input devices. Displays and related drivers require process developments for thin film transfer (TFT), micromachining, and power devices. In signal processing, submicron CMOS process development is required for CPU, digital signal processing (DSP), and memory devices.
ERSO's packaging focus is on multichip modules (MCM), single chip packaging, assembly technologies, high-density printed circuit boards (PCBs), systems packaging designs, and materials development for double-sided TAB, organic solder paste, molding compounds, liquid encapsulants, lead frame materials, and high-Tg substrates. Chip on glass (COG) and tape automated bonding (TAB) for LCD applications have been developed. TAB, COG, and MCM require integrated packaging and assembly technologies and the development of new methods for failure analysis, testability design, and reliability testing. ERSO established a simulation design department to work in these areas. Extensive simulation and analysis software for electrical, thermal, and mechanical design of packaging was developed for in-house as well as external customer applications. ITRI was developing a five-year roadmap for technologies to be completed within 1996. ITRI then planned to develop a strategy for the packaging area.
Fig. 5.4. Taiwan's electronic packaging industry infrastructure (ERSO/ITRI).
Future success for Taiwan will depend on the development of technologies that can be commercialized and produce revenues. Micromachining is thought to offer future opportunities, as are other technologies related to mechatronics, materials science, and biotechnology. A preliminary study of both surface and bulk micromachining processes is being conducted by ITRI. According to one ITRI official,
For the past three years, we have developed some technologies. Now we are trying to apply them to products. We hope to market a pressure sensor within two years. We are also developing a room- temperature thermal imager. We have a team that includes four companies and a professor as project manager. They are designing the complete package. We are also developing the lead frame for high pin counts. The complexity comes in tool fabrication. We are trying to use this in infrared technology for the medical industry. We are also considering areas like bioelectronics. One researcher recently synthesized a protein that acts as a biosensor. It looks interesting and fits with our experience in CCD sensor technology. ITRI will continue to look for new technologies and new industries in which it can play a role.
ITRI's Materials Research Laboratory (MRL) is responsible for materials and process developments. With a staff of 600 engineers, MRL helps mostly small firms solve manufacturing problems and add value to existing products through development of cost-effective materials and processing techniques. Taiwan produces most of the materials used for desktop computers, but notebook computers' flat panel displays and batteries were mostly imported from Japan at the time of the WTEC visit. MRL was working to develop lithium batteries, color filters, physical and chemical sensors, and aluminum foil capacitors.
MRL is developing a range of materials to industrial specifications. Primary areas of interest are those in which it can integrate backwards into materials currently being imported. Such imports can determine the future success or even survival of these industries. Examples include electronic polymers like photo-resist and solder masks, permanent magnets and recording media, photoconductive toners, organic composites like carbon fiber for bicycle parts, ceramics, and superconducting wires and films. Because of Taiwan's hot and humid climate, compounded by pollution, MRL does extensive research on corrosion protection technologies. MRL is recognized in areas of life assessment technology, corrosion monitoring and protection engineering, and environmental assisted corrosion.
The metal processing technologies under development by ITRI are metal melting and rolling techniques for lead frames, powder injection molding technology, continuous casting of copper wire, and composite design. MRL deploys intelligent processing of material for cost-effectiveness. The chemical and mechanical labs are also involved in equipment and process developments. They are now looking for better ways to coordinate and integrate these various programs. This is especially critical in the packaging areas that require integration of materials and process technology and components.
Printed Circuit Boards
PCB fabrication technology, started at ITRI, is now mature. Two hundred firms produced PCBs valued at $1.7 billion in 1995. Taiwan had six of the top 100 PCB manufacturers providing multilayer and double-sided boards. In 1994, Taiwan ranked third in the global PCB market. One new player entered in 1995 with flexible PCB and TAB tape carrier substrates. Between 1991 and 1994, PC board sales grew from $710 million to $1.2 billion. In the PCB sector, there are a lot of very small, specialized companies that do only drilling or plating of boards, allowing PCB companies to subcontract when needed to increase their capacity by as much as 200%. While Taiwan is the king of wire bonding and has a strong product reputation as the number-one producer of PCBs and motherboards, it lacks the high-end materials and equipment capabilities at the next level up the value chain.
Single and double-sided boards have remained flat in Taiwan as new facilities have moved to China. Multilayer boards accounted for 36% of capacity in 1995 and were projected to increase to 45% of Taiwan's capacity by 1997. In 1997, about 42% of the capacity was expected to be FR-4 materials, 44% paper-based materials, and 14% CEM-based materials. ITRI has programs to develop advanced VG materials in its materials research laboratories. Taiwan's technical capabilities included the following at the time of the WTEC panel's visit:
Twenty-three firms assembled motherboards valued at $2 billion in 1995. Taiwan has held over 65% market share in computer motherboard assemblies. Taiwan's technological capabilities are shown in Table 5.6. Intel is providing TAB process technology for assembling P-6 microprocessors for notebooks using tape carrier packages (TCP). It requires a separate "daughter" board using super-solder technology. As companies produce daughterboards to supply OEM orders, they can also begin production of notebook computers and a variety of PCMCIA cards. Areas of major investment now include wafer fabrication and LCD production, which are critical technologies and components for information products.Table 5.6
ERSO's director of packaging had been the vice president of a U.S. packaging company. In electronic packaging, ERSO is focusing research on three areas:
As electronic products have become smaller and lighter, electronic packaging has become one of the most important concerns for the microelectronics industry. Many design houses have started to invest in testing and packaging areas. There are 21 companies in Taiwan that package ICs, with revenues valued at $2.6 billion in 1995. At the IC level, there is rapid expansion with production of PQFP (plastic quad flat packages), TSOP (thin small outline packages), PPGA (plastic pin grid arrays), BGA (ball grid arrays), MCM-L (multichip module-laminate), and flip chip. Integrating packaging and testing is under development. Taiwan's packaging technology capabilities include the following:
Development of chip-scale packaging was planned through a component consortium and technology licensing.
MCM Packaging Center
ERSO established the multichip module (MCM) service center to provide technologies needed to make MCM prototypes. Design, fabrication, and testing of MCM-Ds using silicon substrate materials were developed. Low-cost integrated resistor and capacitor networks are two features of ERSO's MCM technology. Technical services begin with a discussion with customers. Electrical designs, including signal integrity analysis, physical layout design, and a chip placement design are based on customer product specifications. Combined with electrical and physical design, a computer 3D simulation of thermal dissipation guarantees module reliability. Module temperature distributions are checked against the thermal simulation. At the time of the WTEC study trip, this project was moving to pilot scale production and private investors were being sought to commercialize the process.
ERSO has low-cost MCM-D substrate packaging, flip-chip bonding, thin-film resistor array, ceramic ball grid array, and plastic ball grid array capabilities. The substrate, which consists of up to five layers of aluminum interconnecting lines and polyimide dielectrics, is 100%-tested before module assembly. Automatic pick-and-place equipment positions known-good-bare-die onto the substrate for high-speed wire bonding. Since the substrate is made of polyimide, the wire bonding is under a tight process control. The wire-bonded module is tested before delivery. The Taiwan Known Good Die (KGD) Alliance was established to develop testing techniques for bare IC dies and to promote overall improvement of Taiwan's MCM packaging industry.
Imports of process and testing equipment, molding compounds, and molding facilities are still required. In 1995, Taiwan's molding compound market demand was $85 million, all of which was imported. Of that, $66 million (78%) was used for IC products, which market was growing about 40% annually. ITRI has supported polymer development at the Union Chemical Laboratory. The 1995 lead frame market was $281 million, of which 77% was imported ($215 million) and 23% was supplied locally. Molding equipment sales in 1994 were 262 units ($27 million), of which 28% was locally supported.
In 1995, domestic suppliers provided 19.1% of Taiwan's IC requirements. This is projected to reach 37.8% by the year 2000. Beginning with acquisition of 7-micron CMOS technology in the mid-1970s, ERSO has been instrumental in building Taiwan's IC industry. It is now identifying additional areas to develop. Strategic alliances with both domestic and foreign companies are actively pursued, as shown in Fig. 5.5. Primary research areas at ERSO include the following:
United Microelectronics Corporation (UMC) was ERSO's first Taiwanese IC spin-off in 1979. Most capital came from government and local banks. The Electronics Testing Center was spun off in 1982. The Taiwan Semiconductor Manufacturing Company (TSMC) IC foundry was the third spin-off from ERSO. All technical people initially came from ERSO. The Taiwan Mask Corporation (TMC), the first domestic mask manufacturer, and EMMT System Corporation were spun off in 1988. In 1994, Vanguard International Semiconductor (VIS) was spun-off as the first 8-inch wafer fab in Taiwan, specializing in sub-micron memory IC manufacturing. In 1995, there were 26 Taiwanese companies involved in IC design with total revenues of $593 million, and 12 firms producing ICs with total revenues of $4 billion. There are four 8-inch fabs in operation, 10 under construction, and 6 in the planning phase. By the year 2000, 20 wafer fabs are to be operating. As shown in Table 5.7, 19 fabs would account for over $16.5 billion in investment and provide capacity of 4.8 million pieces per month. With new fab capacity being added across Asia, overcapacity is a potential problem. While prices were down in 1996, past margins - for some firms as great as 50% - were considered high. Such high margins are not considered good for the industry.
Fig. 5.5. Strategic alliances in Taiwan's IC industry (MIC, ERSO/ITRI ITIS Project). See also Table 5.7.
Taiwan's 8-inch Fab Investments
Source: MIC, ERSO/ITRI ITIS Project
In the production of SRAMs, Taiwan was already the low-cost producer at the time of the WTEC visit (Taiwan's relative SRAM cost = 1, Korea = 1.14, Japan = 1.43, and the United States = 1.6). By 2000, Taiwan wants a 39.8% share of the global IC foundry market. To support these market goals, an alliance of companies is developing deep submicron process capabilities in the 0.25-0.18 Ám range. Eight companies are working on 12-inch wafer development with expected mass production in the year 2000. National Chip Implementation Center projects also include e-beam equipment and PCVD etching equipment developments. ITRI is developing packaging equipment, light-resistor, and Si-resin materials.
Table 5.8 shows Taiwan's IC capabilities. After completing 0.5 Ám CMOS technology development, ERSO is now working on various 0.25 Ám technology modules jointly with local IC manufacturers. Because mixed-signal ICs, such as data converters and phase locked loops, are well developed, ERSO is moving towards high-frequency ICs (including monolithic microwave ICs) and low-power ICs for applications like wireless communications and mobile personal equipment. Complete chip sets for CCDs, along with relevant system technology, have been developed for applications such as security monitors, video phones, scanners, and digital video storage systems.Table 5.8
Source: ERSO/ITRI ITIS Project
Taiwan's electronic equipment industry was worth $4.4 billion in 1995 and is currently supplied by only a few countries. Taiwan's market forecast for the 1995-2000 period for IC packaging equipment follows:
Even though Taiwan is a major market for semiconductor production equipment, it is weak in equipment production. Since Taiwan lacks an equipment industry to leverage, it would require outside participation in order to establish a Taiwanese capability. ITRI officials are considering establishing a consortium similar to SEMATECH. The industry's research lab has developed a wire bonding machine, but it lacks the proven reliability needed for low-cost manufacturing. However, a tax incentive is offered for purchasing equipment from local producers. To keep their Taiwanese equipment business, foreign suppliers give Taiwanese firms a 20% discount on most equipment, giving Taiwanese companies a cost advantage over other countries.
Flat Panel Displays
In 1995, Japanese suppliers provided 100% of the 10-inch STN and TFT LCDs for notebook PCs produced in Taiwan. Local LCD vendors provided 90% of the screens used in electronic dictionaries, though 90% of the materials used to produce them were imported. Japanese firms also provided 87% of the high-resolution CRT monitors and 30% of the mid-resolution monitors used in Taiwan. Local CRT vendors produced 20% of the mid-resolution monitors and 80% of the low-resolution monitors, though 40% of materials were imported.
As Table 5.9 shows, Taiwan mass-produced CRTs up to 21 inches at the time of the WTEC visit; was in pilot production of CRTs over 28 inches; and was developing 16:9 ratio CRTs for use in HDTV. In LEDs, 10-inch color STN and TFT LCDs were in pilot production; TFTs over 10 inches were in development. Color filter driver ICs were imported. Taiwan is a close follower in high-luminance LEDs and is developing the blue LED at ITRI.Table 5.9
Source: ERSO/ITRI ITIS Project
The thin film transistor liquid crystal display (TFT LCD) has been the preferred flat panel display technology since about 1989. ERSO had previously developed 3-inch and 6-inch color panels for both direct view and projection applications, and demonstrated wide viewing angle and quick response displays in 1996. The first 10.4-inch panels were displayed in 1996 for use in notebook computers. In 1995, two firms were producing TFT LCDs in Taiwan, and 13 firms were producing STN displays. Nan Ya Plastics produces 30,000 medium and small STN units per month. CPT began producing 10-inch STN LCDs for mobile PCs in 1995. Unipac produces 5,000 TFT LCDs per month ranging from 3-inch to 5.6-inch. In 1996, it planned to produce 30,000 units of large TFT LCDs per month. Prime View began producing 120,000 units/yr. of medium and small TFT LCDs in 1995 and was planning to product large units in the near future. Table 5.10 summarizes these companies' LCD investments and production plans.
In flat panel displays, ERSO is focusing its attention on four areas:
Field emission display (FED) technology development includes the combination of CRTs and microelectronics into 3-inch color panels. At the time the WTEC team visited Taiwan, ERSO was developing the pilot plant to produce them.