Peter Shih, founder of the Photonics Industry and Technology Development
Association (PIDA) in Taiwan, spoke to Oliver Graydon about the country's
activities in optoelectronics.

From Opto & Laser Europe July/August 2004


Peter Shih
OG: How did PIDA come about?

PS: PIDA was founded about 11 years ago. During my time abroad I found out that
the OITDA in Japan and the OIDA in the US were very helpful for promoting
photonics. When I returned to Taiwan I suggested setting up such an
organization to our government and industry executives. The main purpose of
PIDA is to accelerate the development of the photonics industry by providing
services, information and support, such as organizing events and producing
market data.

How did the photonics industry get started in Taiwan?

About 20 years ago, the domestic optoelectronics industry was almost non-
existent in Taiwan. There was some labour-intensive LED packaging and a few
foreign companies from the US and Japan had a presence here because costs were
very low.

Although Taiwan had almost no activities at that time it did have a very strong
PC industry, and that's very important. It was clear that the computer industry
was moving towards the use of optical technologies such as scanners, digital
cameras, laser printers, optical storage (CD/ DVD) and flat-panel displays. At
that time all screens were CRT and storage was still oriented towards magnetic
hard discs. However, we anticipated the coming age of photonics and realized
that one day PC peripherals would all become optical. Now, 20 years later, that
has become a reality and is a $25bn business.

How did Taiwan become so strong in optoelectronics?

Government policy has been very important to our success. Our government chose
to invest in photonics and gave incentives and benefits to companies getting
involved in the development of photonics products. Examples include funding for
high-risk businesses and tax incentives. Promotion schemes, seminars and media
coverage have also helped. Funding was given to universities to start research
and training in the area.

We have a TWD20 bn (?480 m) national project in photonics which is split into
three phases, each lasting four years. During the past decade, many Taiwanese
researchers working and studying in the US at universities and firms such as
General Electric, IBM and HP have come back to Taiwan to take up good jobs with
attractive salaries or to found their own companies. Setting up companies and
getting financing is quite easy because there are lots of VCs wanting to
invest.

Tell me about Taiwan today.

Today there are around 1000 optoelectronics firms in Taiwan, of which about 700
are manufacturers, 200 are distributors and 100 are foreign investments. Most
of the domestic firms are small- to medium-sized enterprises, which are very
fast-moving and highly competitive. Many of them are located in one of the four
science parks in Taiwan. Some of these firms, such as the LCD flat-panel makers
BenQ and AU Optronics, are growing to become large companies with an
international reputation. Today we are the world's number one producer of
several products. Last year our top 10 photonics products reached a production
value of $16bn (?13 bn) and included TFT-LCD panels, media (CD and DVD) drives,
digital cameras and LEDs.

What about the future?

There is a dramatic change taking place in Taiwan. It has transformed from a
region relying on low labour costs to one with an expertise in high-tech
manufacture. Low-cost assembly of items is now moving to mainland China. As for
the future, this shift from a labour intensive business model to one of
automated, capital-intensive manufacture will continue. Companies in Taiwan now
realize that having their own R&D and IP is very important and they have
started to establish better links with universities and create R&D centres.
Today there is now a shortage of optoelectronic engineers in Taiwan. This year
about 10 000 job openings need to be filled.

It's tough to compete with Japan and the US but we are also an excellent ally
thanks to our relationship with Japan on LCDs and the US for OEM manufacture.
The only way for Taiwan to succeed is to manufacture higher-value items and
create a knowledge-intensive economy. Four technology areas are likely to be
increasingly important: very-high-speed information processing known as tera-
photonics; nanophotonics; poly-photonics such as organic light-emitting diode
(OLED) technology; and biophotonics.

For the past 20 years, Taiwan has operated a business model of making "hidden"
OEM modules and assembling products for well-known western names such as IBM.
It's not easy to create an international brand name. It is very expensive and
takes a lot of time and effort. Many businessmen still believe that the OEM
model is the best route to success. That said, companies such as Acer and BenQ
are growing and becoming much better known outside Taiwan.

About the author
Peter Shih is president of PIDA and manages the Taiwan National Science
Council's electro-optics unit. For more information visit www.pida.org.tw