China Electric Looks to Eco-friendly Business for Greener Pastures

Chairperson L.C. Chou signs an

The 54-year-old China Electric Mfg. Co., Ltd. in Taiwan is breaking bold ground in the local lighting business, notable more for shedding the stereotypical, but often accurate, operational model than actually venturing into the much touted LED lighting sector. Not many in Taiwan's business community outside the ICT circle will admit it but the fact is that many in traditional manufacturing industries on the island are known for their overly-conservative ways than being mavericks. Many factors work to preserve such over-starched business model, not least of which is the Chinese culture of adamantly standing one's territory-often to maintain nepotism-meaning why invest in cutting-edge technologies to develop new niche and risk failure when antiquated formulas have worked for decades?

As such, chairperson and president of China Electric truly deserves applause: In late September L.C. Chou signed an agreement with Norbert Hiller at Cree Inc. to jointly develop LED lighting. The partnership is part of the Taiwanese lighting manufacturer's effort to double revenue to NT$7.6 billion (US$230 million at US$1:NT$33) by 2011 from the current level by focusing more on producing green products.

Paying a Price

China Electric has been paying a price, literally, for being overly-prudent: the maker generates most of its revenues from supplying Taiwan with traditional lighting products as fluorescent lamps, lighting fixtures and ballasts. Having seen relatively flat turnovers, the maker's 2009 revenue is projected to slightly slip to NT$3.83 billion (US$116 million) from last year's NT$3.85 billion (US$116.6 million).

In recent years, China Electric, Taiwan's No.1 lighting manufacturer, has diversified into several profitable segments as solar-cell module, cold cathode fluorescent lamp (CCFL) and light emitting diode (LED) lighting.

Bright Projection

Partnering with Cree, a world's top-five LED chipmaker, will bring China Electric next year estimated revenues exceeding NT$240 million (US$7.2 million) projected from shipping LED lighting items this year. The lighting manufacturer has shipped NT$150 million (US$4.5 million) of LED lights to the Middle East and Southeast Asia in the first three quarters this year. And the future looks brighter as China Electric will be able to enter North America, without patent infringements, by selling LED lighting built with Cree chips and packaging.

China Electric's vice president, S.Y. Tung, says that the maker will build T-bar lights, downlights, projector lights, candle lights and other household lights with Cree chips, with the collaboration to enable China Electric to raise its share in the global LED lighting market.

Allying with Cree is expected to help China Electric achieve its goal for the Taiwan market sooner: The company vows to snatch up 50% of Taiwan's LED lighting market, which it projects will constitute 5-10% of the estimated NT$15 billion (US$454 million) turnover for the island's general-lighting market in a few years.

China Electric will rely on CCFLs as a main product for the compact fluorescent lighting segment. Chou says the maker has introduced 7W, 9W, 13W and 18W CCFLs in addition to CCFL tubes for decorative and commercial lighting.

Blessing in Disguise

The chairperson points out the global recession has been a blessing in disguise-helping to boost usage of compact fluorescent lamps when harsher times tend to force consumers to look for ways to save, including power bills. She estimates that global sales of such lamps have so far reached 2.4 billion units and will increase to six billion next year.

China Electric holds major stakes in and buys CCFLs from Wellypower Optronics Co., Ltd. and TOA Optronics Corp., a convenient setup that keeps business within the family.

The two CCFL makers have long depended on AU Optronics Corp. and Chi Mei Optoelectronics Corp., Taiwan's top two LCD display makers, for orders, which have slumped due to sagging demand for LCD TVs amid the global downturn. So China Electric and the two CCFL affiliates have decided to use part of the CCFL lines to turn out general lighting.

As the backlight of LCD TVs, CCFLs now last a minimum 80,000 hours and 100,000 on and off operations, far superior to most existing lamps. Also, these CCFLs are more eco-friendly, emitting no UV B that burns skin and contain much less materials and no mercury than T5 lamps due to smaller size.

EV Batteries

China Electric has also diversified into the lithium-iron battery sector by acquiring a 15% stake in battery maker Gold Crown Energy Co. (GC) of mainland China for US$3 million. Chou says the two companies will develop such batteries for electric vehicles as motorbikes, bicycles and lighting equipment. "The partnership taps synergy achieved with GC's technological expertise and China Electric's distribution, marketing and after-sales service skills."

GC has reportedly developed super-power lithium-iron-phosphate batteries that fully charge and discharge in only 10 minutes, claiming it is the world's exclusive holder of the China patent on anode phosphate. The battery, GC's executives report, can replace lead-acid battery to store solar energy with lifespan as long as 10 years.

China Electric will invest around NT$100 million (US$3 million) to build two production lines. "We will focus on production of cells using GC's anode phosphate and aim towards battery management systems," Chou adds, noting that lithium-iron batteries are versatile. "We've built batteries with uninterruptible power supply (UPS) into the 40,000 work lamps recently ordered, making them also suitable for camping and other outdoor lighting purposes."

Planning to supply the batteries to motorbike maker Kwang Yang Motor Co., Ltd. and bicycle maker Giant Manufacturing Co., Ltd., China Electric will market such items under its own "TOA Green Energy" brand.

Confident Nevertheless

Despite the crowded global lighting market, Chou forges ahead confidently: "Our strategy in Asia has been to partner with Nichia to use its phosphor powders; in mainland China to market under the private brand TOA; and in North America to team up with Cree."

To tap the China market, China Electric recently set up a production workshop in the coastal city of Xiamen in Fujian Province. Chou says her company will ask contract suppliers in Taiwan and the mainland's retail partners to jointly develop the market, adding that such alliance will hopefully raise market share starting next year.

The company has also achieved modest success in Turkey, Kuwait and Vietnam. "Despite the relatively small economies, we've seen encouraging profitability, even leading in many markets," Chou says.

At home, China Electric is partnering with the electronics retailer Zero One Tech Corp., which runs over 1,500 outlets islandwide and works with around 1,000 dealers worldwide.