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In 2002, Taiwan’s plan to strengthen its display industry focused on building more of the supply chain at home, creating demand for flat-panel products, and investing in research and development. The policy push came after local TFT-LCD makers had spent more than $8 billion on manufacturing, while 31 percent of material costs were still controlled outside Taiwan.
Why Taiwan wanted to strengthen its display industry
At a Taipei summit reported by EE Times on September 8, 2002, government officials and display-industry executives discussed how Taiwan could protect and expand its position in TFT-LCD and OLED production. The concern was that producing panels was not enough: reliance on foreign suppliers for materials and equipment left local manufacturers exposed to costs and supply-chain constraints.
Hwang Tai-yang, director of Taiwan’s Committee for Information Industry Development, said, “Taiwan is busily developing the supply chain.” He added that 31 percent of material costs remained “non-Taiwan controlled” and were being paid to foreign companies. The policy aim was to increase local participation upstream, including in components and manufacturing machinery.
The three parts of the plan
1. Build local component and machinery capability
Developing key components and machinery in Taiwan was intended to lower production costs and reduce dependence on overseas suppliers. This was the upstream part of the strategy: strengthen the businesses that supplied the factories, not only the firms assembling finished panels.
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2. Create demand for flat-panel products
The government also intended to actively develop consumer markets for products using flat-panel displays. Applications named at the time included televisions, game consoles, electronic books, and mobile handsets. A larger local and regional market could help manufacturers sell more panels and support investment in production.
3. Invest in R&D and intellectual property
More research and development was meant to deepen Taiwan’s intellectual-property base and accelerate the development of next-generation fabrication plants. This addressed the longer-term challenge of competing through technology as well as manufacturing scale.
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How Taiwan and mainland China were expected to divide production
Taiwan’s proposed manufacturing model assigned different roles across the region. Taiwan and Japan were expected to supply key midstream and upstream components, while mainland China would become a downstream assembly and production base for Taiwanese flat-panel-display makers. Taiwan’s Minister of Economic Affairs, Lin Yi-fu, called this an emerging model.
The distinction matters: the strategy did not describe moving the entire industry out of Taiwan. It envisaged Taiwan retaining important supplier and technology roles while using mainland China for downstream manufacturing and assembly.
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What Taiwan was making—and what the 2002 figures meant
The industry covered more than one display type and application. Taiwan produced medium-size LCD panels for notebooks and monitors, as well as OLED panels for mobile phones. The figures below were reported in 2002; the 2003 values were forecasts, not subsequently verified results.
| Figure | What it described | Period and qualification |
|---|---|---|
| More than $8 billion | Spending by Taiwan’s TFT-LCD makers on manufacturing | Several years before the 2002 summit, as reported by EE Times in 2002 |
| 31 percent | Share of material costs still controlled outside Taiwan | Statement by CIID director Hwang Tai-yang, reported in 2002 |
| Nearly 40 percent | Taiwan’s share of the world LCD market by production value | 2002 figure reported by EE Times |
| $7.98 billion | Taiwan LCD production value | 2002 figure reported by EE Times |
| 2 million panels | Ritek Display’s estimated OLED handset-panel shipments | Estimate for 2002, reported by EE Times |
| 10 million panels | Ritek Display’s estimated OLED handset-panel shipments | Estimate for 2003, reported by EE Times |
| 9.5 percent | Growth in Taiwan’s display industry | CIID forecast for 2003, reported by EE Times |
| $8.7 billion | Production value for Taiwan suppliers | CIID forecast for 2003, reported by EE Times |
These are historical figures and expectations from 2002–03, not current industry statistics. In particular, the 2003 growth and production values should be read as forecasts made at the time.
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The competitive pressure behind the policy
A near-term concern was additional supply from South Korean fifth-generation LCD fabs, which were expected to put pressure on prices. Taiwan’s response combined cost control through local suppliers, a broader base of applications, and investment in technology and intellectual property. Together, these measures were intended to make the industry less vulnerable to price competition alone.
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