The story began nine years ago with AUOs first fab

“At the beginning, we only heard that we were building a fab - we had no idea what a TFT-LCD, or even the clean room, would look like, but the decision was to start building,” recalled C. Y. Ling, Head of Expansion Division, who has directed the construction of every fab -- from the very first one of the Acer Display Technology Inc. (ADT) era to the present AUO Generation 7.5. “Because we were working against time, we had begun digging without even knowing where to obtain the technology for building the fab. We broke ground in October 1997, and dug a hole that was bigger than a swimming pool at the site. Although many things were undetermined at the time, the one thing that remained constant was our goal.” It was not until six months after ADT broke ground that relevant technology was located (AUO signed an official agreement with IBM Japan on March 17th, 1998), and the source of the technology for Fab Generation 3.5 was confirmed.

In order to catch up with growing market opportunities, the pace at which ADT was building the fab surpassed the imagination of the employees themselves. Before the construction on the plant was finished, the clean room team was already pressing to move in; even while the roof of the fab was still under construction, the clean room team had already moved in and begun operation. Immediately following the return of the LCD team from a three-month training at IBM Japan, the fab was completed. On January 4th, heavy equipment started to move in, and on March 12th, only a year since the agreement was signed with IBM, the historical “ice-breaking journey” was launched (the initial test run of the whole process). The incumbent AUO VP & GM of Global Manufacturing, L. J. Chen, remembered that when the second batch of the ice-breaking products tumbled from the inside of the stocker because the machine was unsteady, the whole batch was shattered; it was a heart-breaking sight for everyone, but as the engineers cleaned up the pieces, they encouraged one another with the Chinese pun of “piece for peace”, which meant that all would be well. On April 9th, the first ADT 13.3” TFT-LCD was lit up; on July 5th, mass production kicked off officially; and, on July 30th, the first shipment of 13.3” products was delivered into the hands of our customers. In October of the same year, fab yield achieved 100%; in the same month, ADT set the record of six consecutive weeks of fab yield exceeding 70%, a record which took the new fab in IBM Japan nearly a year to reach.

What was the rush? “At the time, suspending the operation for one minute would have cost the company an estimated loss of NT$25,000! The cost was a tremendous pressure for the company,” remarked Dr. L.J. Chen, AUO President, who shuddered as he recollected how time-pressed things had been during the company's initial stage. “We were willing to take a certain amount of risk, in exchange for more significant breakthroughs. This was true AUO nerve.”

A misconception that the industry would be doomed without rain

“Shortly after the merger in 2001, it was decided that we should apply for ADR (American Depositary Receipts).” Jerry Liu, Director of the Finance Department, sighed good-humoredly that it was difficult to snatch a moment of leisure at AUO because the industry was growing at such a fast pace.

On December 16th, 2001, AUO filed a registration statement with the SEC (Securities and Exchange Commission) and immediately began to prepare the required documentation. After the initial submission of the prospectus, the SEC shot back nearly 200 questions. As the U.S. was completely unfamiliar with the flat-panel display industry at the time, the team of less than ten people worked many days and nights without rest to put together supplementary materials. The hard work yielded results, and in the short span of five months, in early May 2002, AUO successfully registered its public filing with the SEC. What ensued was two weeks of road shows for major potential investors around the world.

The road show team consisted of nine people. Divided into two groups of Red and Blue, they were to visit Hong Kong, Singapore, Japan, England, Ireland, Scotland, Holland, Germany, Italy and the U.S. to meet with 124 of the world’s top investors and attend 13 investor meetings in two weeks. Throughout the whole trip, the management team patiently repeated the same presentation over and over again, introducing the flat-panel display industry and technology and answering all types of questions from investors. In May 2002, Taiwan was facing a serious drought due to lack of rain. “When investors saw us, their first question was: Has it rained in Taiwan yet? They thought the industry would be doomed without rain. It was apparent that foreign investors had little knowledge of the flat-panel display industry because water only accounts for a very small part of the cost in flat-panel displays,” recalled Kevin Guo, Project Manager of the AUO Singapore Office, who participated in the road show from beginning to end. “As the TFT-LCD industry and technology were concentrated in Japan, Korea, and Taiwan, it was basically an Asian industry; the purpose of the road show was to give global investors a comprehensive introduction to the industry.”

The nine-member road show team planned to cover more than half the globe in only two weeks, and each person’s mileage exceeded ten thousand miles. Each morning, the members would wake up trying to recollect which country they were in and where they were heading next. Max Cheng, CFO, remembered the one unforgettable good meal they had. “Our daily diet consisted mainly of hard bread, smoked salmon, and cold sandwiches; sometimes when there was no time for a proper meal, we would take some instant noodles from our suitcases and make a meal out of them. While taking a break from a meeting in Amsterdam one day, the consignee somehow managed to get hold of some steaming hot won ton, cha-sui (spit roast) and beef noodles. Still in our suits, we began eating the food with relish right on the curb of a main road in Holland. It was unquestionably the tastiest noodles I’ve ever had in my life!”

The final pricing of the whole ADR was completed in Hong Kong. On May 23rd, AUO was officially listed on the NYSE (New York Stock Exchange) and went public at a 4.5% deduction of the proposed pricing, becoming the first TFT-LCD company in the world to go public in the U.S. With a total of USD $660 million raised in capital, AUO was the second largest IPO (initial public offering) of ADR in the history of Taiwan (see Note below).

Note: Second only to that of TSMC (Taiwan Semiconductor Manufacturing Company) and UMC (United Microelectronics Corporation) in Taiwan.

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Going Public on the NYSE: Q&A
Why NYSE?
Where is the Opening Bell
How does it feel to stand on the balcony of the NYSE?

 

" Why NYSE? "
Answered by H.B. Chen, President & COO

The TFT-LCD industry is capital- and technology- intensive; at that time we had foreseen that we must invest enormously in manufacturing facilities and R&D for long-term development and international competitiveness, thus the acquisition of capital was a critical factor in maintaining a stable operation of the company. Fund-raising in Taiwan has its limits, and one to two rounds of fund-raising were no longer sufficient to sustain the growth of the company, making the internationalization of the channels of capital resources an inevitable step.

The NYSE is the world’s largest stock exchange, with over two hundred years of history and more than 2,600 listed companies. It has a market value of USD14.5 trillion, and an average daily trading volume of USD41.4 billion. Compared to being listed on Nasdaq, which only has a market value of USD2.7 trillion, the significance and potential for AUO to be listed on NYSE are far greater. There is also a great difference between ADR and GDR (Global Depository Receipts), where ADR has a far larger capital base for AUO to raise funds more efficiently. Most companies, however, are unsuccessful at ADR application because of its complex and stringent process; GDR is much easier, and can normally be completed in one month and a half.

Being listed on the NYSE has several significant distinctions. Firstly, AUO has represented Taiwan to give a comprehensive introduction of the TFT-LCD industry to the world’s professional investors. Secondly, the transition of the company into a professionally managed corporation following international standards of management puts a higher demand on both the company administration and the management team, which serves as performance safeguard for investors and provides enhanced security for investments. Thirdly, the process of the NYSE listing has brought AUO into contact with the world’s major investors, allowing AUO to gain insight into investors’ needs from an international point of view, and thus cumulating valuable experience in communication with investors around the world. Currently AUO’s foreign shareholding has exceeded 50%, which adds more international competitiveness to its financial structure.

 

" Where is the Opening Bell? "
Answered by Dr. Hui Hsiung, Executive V.P.

Many people were puzzled by the photos of the bell-ringing ceremony because they could neither see the bell, nor the action of ringing the bell. Where was the Opening Bell, they wondered? Actually, the bell is an electric one and does not need to be rung physically – you just press a button! AUO went public officially on May 23rd, 2002, and the bell-ringing ceremony was held on May 30th at 9:30 a.m.

 

" How does it feel to stand on the balcony of the NYSE? "
Answered by Max Cheng, CFO

It is said that the balcony has over 140 years of history. Not anyone can ascend to the balcony, and many of the employees who have worked here all their lives have never been up there. When I joined Acer Display Technology, Inc. in 1998, I never dreamed it would lead to this extraordinary moment…

At 9:15 a.m. on May 30th, 2002, we entered the first floor of the NYSE; the actual experience of this legendary place far surpassed the description from other people. At 9:25 a.m., the AUO executives gathered on the balcony to await the final moment. From our height, we had a view of all the brokers on the exchange floor as they waited for the ringing of the bell to signify the day’s start of trading, an important event also watched attentively by the world.

At 9:30 a.m. (U.S.A. Eastern Standard Time) on the morning of May 30th, K. Y. Lee, Chairman, represented AUO to ring the Opening Bell at the NYSE. The loud and clear sound of the bell was accompanied by applause; I felt that the moment was not only a glorious one for AUO, but for Taiwan as well. AUO was the first company in the TFT-LCD industry to enter the international capital market, and it symbolized the recognition of investors of AUO’s operation as a whole. The sound of the applause made the five months of hard work worthwhile. The applause on the balcony lasted 20-odd minutes, an event which we had flown 20-odd hours to take part in. It was a hard-won moment. There are approximately 3,600 employees working in the NYSE every day, and what differentiated the NYSE from other exchanges is its resemblance to a live auction; in a hubbub of voices, all the trading was conducted in a transparent process at specific locations. Beginning from May 23rd, 2002, AUO also has its own fixed billboard and specialist broker at the NYSE, making its entrance to the international capitalist market with the other 2,600 member firms from all over the world.

Traffic control in the streets of the NYSE that day displayed three large flags: AUO, NYSE and U.S.A. We were in the encampment of capitalism, and we were very proud.

We have left behind a door, a time tunnel connecting to the past

“This Yeo Yuan Ju (友緣居) Community Museum before our eyes may not seem like much to experts, but that is not the issue. Its very presence inside the grounds of AU Optronics (Suzhou) Corporation is a charming tale. If we travel back in time to the year 2001, you would not see a grand high-tech park, but a small town called Kuatang,” wrote a journalist in the Chinese Entrepreneurs magazine. The museum at AUO’s module assembly plant is gradually gaining a reputation among guests and visitors to the site.

The module assembly plant lies within 32 hectares of land inside the Suzhou Industrial Park among a great number of modern factories. Back in May 2005, however, when the construction team first surveyed the land, there was only Kuatang, a town of 20,000 inhabitants equipped with modest buildings and amenities such as the town hall, a market, a school, and a post office. Cutting through the center of the town is a canal, which in the old days had been a major channel of transportation for rations and forage, thus accounting for the numerous granaries dotting its banks. Aerial photographs from as early as 1970 show there had been dozens of granaries, which had fallen into disuse over the years. Three granaries were situated within the AUO grounds and formed a triangle resembling the Chinese character “品” (pin). “Before beginning the construction work, K.Y. Lee, Chairman & CEO, had reminded us that although destruction comes before reconstruction, one should always “thank the tree whose fruits one partakes” and remember the source of one’s fortunes. Therefore, before we began the demolition, we should conduct a systematic collection of cultural relics in the region, so that future Kuatang residents and AUO staff at the Suzhou plant could have the opportunity to learn about the original sights and features of the site prior to the existence of the plant,” said Paul Peng, VP & GM of Information Technology Display Business Group and former General Manager of AUO’s Suzhou Plant; in his mind, Kuatang had resembled rural Taiwan in the 1940s and 1950s, and he felt particularly affectionate toward Kuatang as he had come from a farming village himself.

The process of demolition was faster than expected, and it was discovered one morning that one granary was demolished and beyond salvaging; thus Yeo Yuan Ju now only possesses two granaries. The granaries were built with mixtures of straws, earth and glutinous rice, in the same mold and lines as those from the Qing Dynasty, but it is impossible to determine the exact period of construction. The two granaries fall within the greens reservation area at the site; after renovation, they form a peaceful sight with the surrounding lawns and plazas that seems to stand still in time, offering an interesting contrast to the massive plant.

Before setting foot inside Yeo Yuan Ju, the Drum Pavilion (Baogu Ting) at the door with its golden rockery (金山), stone drum and door mound (門墩), symbolize the roll of drums and the sound of gongs as the master gives the honored guests a warm welcome. Inside the museum, the Leisure Residence (Touxian Ju) records the lifestyle peculiar to Suzhou; the Wandering Lane of the Carefree Mind (曲徑了煩) displays the images of Suzhou and Kuatang spanning a hundred years from past to present; the Cabinet of Collections (Xiancang Ge) and Room of Preservation (Houna Xuan) exhibit a selection of dozens of traditional farming tools and household items from the South of the Yangzi River in the memory of the people who had worked so hard on this land, and included such pieces as doorplates collected from lanes and alleys, a wooden doorplate of the silk factory, a well cover (井圈), door posts (戶對), ancient eaves tiles, a stone mortar, a heptachord, a bird rifle, a wooden children’s bed, a wooden basin, and a taper cage for locking up children. “Our intention was not to collect antiques; that is far beyond our powers. What we had salvaged were items from our grandmother’s time, a record of the lives of our forefathers. We were all touched by a particular incident here: a former resident who came back to “trace his roots” had found his very own doorplate on the wall of Yeo Yuan Ju, and he was moved beyond words by the sight; his house had gone, but the doorplate is intact and forever preserved at the museum,” recalled Paul Peng, who considered the thoughts and efforts in the conception of the museum to be very well-spent.

Yeo Yuan Ju, like a door in the AUO grounds, is a time tunnel connecting to the past. The rare significance of the museum becomes even more apparent under the collision and stimulation of the past and the present, the east and the west, and life and technology.

On the night of August 1st, 2004, the one and only Antonov AN-225 aircraft, which boasts of the world’s largest freight capacity, arrived at the Chiang Kai-shek (CKS) airport under the expectant eyes of AUO staff. Slowly, the aircraft raised its prow. While the ground staff was skillfully preparing the procedure to unload the cargo, the AUO staff on the site could barely contain their joy and excitement as they waited quietly for the moment the first shipment of the 6th generation (G6) color filter machine was unloaded from the cabin.

The size of the glass for AUO’s G6 plant is 1500mm x 1850mm, which means the color filter machine is 40 meters long and 10 meters wide. The machine was dismantled and placed into 34 containers for transportation, but the largest single part was still 4 meters in height, higher than the cabin of a Boeing 747 cargo aircraft; in addition, the machine weighed 170 tons, which exceeded the load bearing range of normal cargo aircrafts. Therefore, AUO decided to hire the world’s largest cargo aircraft Antonov AN-225 and a 747 cargo aircraft to transport the 34 containers, setting several records in domestic transportation. For land transportation, AUO arranged 18 trailers, the whole caravan stretching as far as 1.5 kilometers; with police cars clearing the traffic throughout the entire journey, the vehicles traveled along the highway at low speed during the middle of the night, and delivered the machine safely to AUO’s G6 plant at the Taichung Science Park. It had taken a day and a night to unload the cargo and transport it from the airport to the destination.

The wingspan of Antonov AN-225 is 88.4 meters, equivalent to the height of a 22-storey building; with a height of 18.1 meters, it stands as tall as a 5-storey building. Although the AUO staff who were present to welcome the G6 color filter machine seemed minuscule standing next to this gigantic aircraft, yet each individual clearly transpired the determined spirit and energy to “reach the peak of perfection and strive for global leading position” – a faithful demonstration of the power of execution with which AUO continues to set new records in creating Taiwan miracles.

In May 2001, executives from Acer Display Technology, Inc. (ADT) (now AU Optronics, AUO) arrived in to Suzhou to survey the land; at the time, “Kuatang” was a small town with busy streets and over 20,000 inhabitants. ADT had decided to build a manufacturing base there (within the site reserved for the Suzhou Industrial Park); the time was two months after the announcement of the merger with Unipac Optoelectronics Corporation.

A manifestation of the sensation of “speed” that has always been the pursuit of AUO staff, the first construction team arrived in late July and broke ground in August. In the next three months, the peculiar sight of the plant going up while old buildings were being torn down could be seen. Buildings marked with the word “demolish” would be torn down quickly, but still not as quick as the construction of the plant. It was said that Suzhou government officials were so hard-pressed by AUO at the time that they dreaded meeting any AUO employee. “While the excavators were digging at one end, we had to chase off people at the other end, as many locals would jump into the diggings for scrap steel, bricks and tiles, which could be sold for money,” said Fred Hsieh, General Manager of AU Optronics (Suzhou) Corporation. According to him, much time and effort were spent on executing the management and safety of the construction site; it was a very different experience.

Within less than a year, in July 2002, the first generation plant in Suzhou started its test run and became the first panel plant in China. What followed was a series of progress. The early cadre members were all very young, most of who married and started a family in the few years before or after their arrival in Suzhou. “We were so busy preparing the plant for ramp up that, between March and October of 2003, we set the record of having five fathers in succession who missed the moment of the birth of their child, all first-borns, because they were unable to make it back to Taiwan on time. Their plan was to rush back when they get the phone call, but it takes at least 12 hours to travel from Suzhou to Taiwan, so they missed the births of their babies: some of them were on their way to the airport, some were in Hong Kong, others were on the plane,” C.C. Tsai, Manager of the Suzhou plant, described how these fellow workers missed the most important moment of their lives. “My daughter was born in 2002; I rushed back after receiving the phone call and arrived just in time. However, I missed the historical moment of the first shipment, which became another of my regrets.”

Looking at this 32 hectare plant now shows that in less than five years, it has nearly 400,000 square meters of factory space standing, and 13,000 people working and living within the grounds. The Suzhou plant now has a workforce exceeding half of the population that Kuatang used to have, its scope comparable to a small town. As these employees came from all over China, recruiting and training became another huge task. The first recruitment was conducted by two teams who visited campuses across China, covering Wuhan, Xian, Harbin, Zangchun, Shenyang, Dalian, and Tianjing; a total of 300 offer letters were sent out during the trip. As for staff training, AUO’s famed AUO Power Camp (APC) was introduced in the Suzhou plant in 2003; after 27 APCs in Taiwan that year, several sessions were held in Suzhou, so that AUO culture could take root and grow in Suzhou. For many of the baseline employees the camp was an exciting brand-new experience, and they could not believe that AUO’s General Manager, H.B. Chen, attended the activities himself; employees whose homes are thousands of kilometers away, especially, were deeply moved by the encouragement and expectation from the company for new employees, which not only transformed into a motivation for work, but also won quite a few tears. Up until the present day, the Suzhou plant maintains such culture awareness activities each year, which have become a common topic and language among AUO staff.

The capacity of this land is now fully loaded; AUO has chosen Xiamen as the strategic site for the next liquid crystal display module (LCM) plant. “We broke ground in Xiamen in April this year (2006), and mass production is scheduled for next year; it appears to me that another five years of development will unfold there,” said Fred Hsieh.

In 1999, AUO began its shipment of products and achieved NTD 3.76 billion in annual revenue. In 2005, the annual revenue reached NTD 217.4 billion, a growth of nearly 58 times.

In 1999, AUO had a workforce of 1,600. By late 2006, AUO will have 42,000 employees worldwide (see Note), a growth of 26 times.

What does AUO produce besides LCD panels?

The industry has grown at an extraordinary speed, and Taiwan's human resources market has become an undersized shirt too small to be worn; AUO therefore has undertaken to design and sew its own shirt in order to get a perfect fit. With robust expansion contributed by nearly ten times of growth in the annual revenue each year, AUO has developed its own HR talent production process to support the large demand for people of talent and ability in the optoelectronics industry. Frank Wu, V.P. of Administration, explained the regularity in the talent production process at AUO: "First we established the quality standards for talent (i.e. core values), then we defined the specifications, and then we began the production. This way, everything from materials selection, purchasing, production, quality control to shipping, all evolve around the corporate core values. All the processes are linked together and rigorously controlled so as to maintain a certain level of yield."

The Sourcing Role of the Recruitment Division
The challenges of a lack of talent in the HR market and the ongoing expansion of the company have placed the Recruitment Division between hammer and anvil. There is pressure from within the company due to the lack of manpower in various units; externally, there is the tough competition from the semi-conductor industry and a scramble for talent with other panel manufacturers. At such times, the creativity of the younger generation is put to the test, and thematic recruiting activities - from "Discovering the Source of Optoelectronics", "Who Says the Earth is Round?", "Career Bus" to "Achieving New Heights - Taipei 101 Career Fair" - become a money saving strategy to get public attention. Media coverage has helped to attract many applicants. In 2003, the first Career Fair for AUO's new fab in the Taichung Science Park attracted such a crowd that it temporarily immobilized the shopping route around the Taichung Sogo Department Store.

How can the quality control be administered when accepting mass purchase of raw materials? In 2003, the Recruitment Division developed a psychometric testing system. A norm analysis of the core competency of 1500 indirect employees in the company was conducted using a questionnaire. Attitudes in compliance with AUO's corporate culture and exceptional performances were set up as the indices, and a norm database was built using the findings. According to Sr. Manager of Recruitment Division, "This scientific approach not only allows the hiring unit to analyze qualities of the applicant apart from his or her professional knowledge, but also improves the efficiency and accuracy of the interview. Moreover, delivering the "right materials" to the production unit - the Personnel Development Division - makes it much easier for them to conduct trainings!"

The Production and Yield Improvement Role of the Personnel Development Division
Once the "right material" reaches the Personnel Development Division, it must go through the initial step in the process within the "golden week" before delivery to the hiring unit. The six-day Win Camp for new employees is this first step. From company introduction, culture inheritance, customer service, problem-solving, project management to international etiquette and job survival. New entrant, Jeremy, who was expecting the orientation week to be a "honeymoon" period, was surprised to find himself working on reports until 2 am with team members every night. "It was exhausting, but it opened my eyes to how serious this company is. From the course structure, you can tell right away that this is a pragmatic company. The six days of hard work formed close bonds between all of the trainees."

In AUO's production of people with talent and ability, the most exceptional initiative is the AUO Learning College (ALC). The seven colleges under the ALC spend tens of millions of NT dollars on training every year. On average, three to five new courses start every day. There are also the collaboration with colleges and universities to provide credit courses in-house, allowing line operators in shifts to pursue a degree while in employment. "Constantly improving product quality, and using different recipes for different products - that is our how know-how!" remarked Sr. Manager of Personnel Development Division, with confidence. From baseline operations, foremen, engineers, to mangers at middle and senior levels, the Personnel Development Division has designed specific courses to provide employees with stimuli to bring out their creativity.

The QC Role of the C&B Division
The talent produced through the process must pass quality check to be considered as quality products. The quality control standards adopt the core competency criteria set up by the Recruitment Division for assessment. "The Professional Aptitude Questionnaires covers a wide area, including taking the initiative, team-working, having competence and integrity, being customer oriented, and having passion for work, as well as the aspects of having quality, communication skills and adaptability. When it comes to quality control, we take out this secret weapon - performance evaluation - in addition to professional performance, personal qualities are easily discerned with these QC standards. Therefore, the quality people who passed our QC all possess specialities as well as characteristics in compliance with the corporate culture," said Sr. Manager of Compensation & Benefits Division, publicly revealing the secret of AUO's performance evaluation system for the first time.

"These people made what AUO is today," concluded Dr. Hui Hsiung, ex Executive V.P., as he looked back on the 3,652 days of working at AUO. H.B. Chen, at that time was President, said "Without these people, AUO would not see such achievements today. This group of ordinary people has built an extraordinary enterprise."

It is people, not panels, who have contributed to AUO's success.

(Note) 42,000 is the estimated total number of employees after the merger of AUO and Quanta Display Inc. in October 2006.