CEO Conversations XIX: Canon Huang, Chairman, Chang Wah Technology CO.,LTD (CWTC, 6548 TT)
Photo source: CWTC
As I arrive at CWTC’s Kaohsiung Headquarters, the rays of the Southern Taiwan sun blaze down on CWTC’s campus, blanketing it in a dazzling bath of sunlight. Chairman Canon Huang greets me, then purposefully leads me on a tour of the company’s newest plant, introducing the key equipment and processes. He says confidently, “This plant will begin commercial production next year; and combined with our existing plants in Greater China and Southeast Asia, it will help us execute our strategy of QFN reinvention and will be a key catalyst in driving CWTC to become the world's largest QFN and metal lead frame supplier within five years.”
Reinventing QFN lead frame through a four-pronged strategy
Metal lead frame is the metal substrate inside an IC package and it is the interface which allows low-wattage DC current to flow between a silicon die and the printed-circuit-board. As such, it is responsible for transmitting input/output (I/O) signals between the circuit board and each semiconductor chip. Canon Huang started his career in Chang Wah Electromaterials (8070 TT), a distributor of semiconductor materials, and has been specializing in metal lead frame for over thirty years. Lead frame technology and the evolution of the market are clearly one of his favorite topics of discussion, as evidenced by the sparkle that appears in his eyes when I ask him to tell me about the history of CWTC, and his vision for the future, “The Chang Wah Group introduced the use of Quad Flat No-Lead (QFN) packaging into the lead frame industry in 1998. In 2006, CWTC began investing in manufacturing capabilities and in developing our own proprietary technology. We now seek to reinvent QFN lead frame through a four-pronged strategy, while expanding our capacity and aiming to become the world's largest QFN lead frame and the largest overall metal lead frame supplier by 2025."
“The first reinvention we seek to catalyze is a shift away from other packaging technologies towards the QFN form factor. In reality, this shift is already in progress. QFN’s high I/O count, small form factor, better thermal conductivity and faster electrical signal transmission have already made it, in our opinion, the ideal lead frame packaging solution. With each passing year, more global tier 1 customers have gradually switched to QFN from IC packaging solutions such as Small Outline (SO), Ball Grid Array (BGA) and Quad Flat Package (QFP). We saw this change coming a long time ago and we now expect QFN packaging to increasingly set the tone for technology development and evolution in the IC lead frame packaging industry this year and beyond.”
“The second reinvention is a reinvention of the QFN manufacturing process. With more than 30 years of expertise in lead frame etching, electro-plating and pre-mold processes, CWTC has developed many industry-leading technologies. Some examples are precision QFN half-etching technology, which can increase the efficiency of the manufacturing process by more than 33%; mechanical mask-based electroplating, which has a huge cost advantage versus photoresist-based electroplating and which can replace photoresist-based electroplating in 80% of the QFN applications it is used in; and a self-developed pre-molding process for high value added QFN applications. Through our efforts to reinvent QFN manufacturing, we have already become the undisputed technology leader in several aspects of the QFN packaging process, defining product category specifications and delivering highly efficient manufacturing solutions to our clients.”
“The third QFN reinvention is an unprecedented expansion of the range of applications that QFN can be used in. CWTC's range of QFN solutions includes QFN, DR-QFN, aQFN and Pre-mold QFN, covering more than 80% of IC applications and IC I/O formats. We're ready to meet strong demand from 5G, WiFi, electric vehicles, high-performance computing, the Internet of Things and Mini LED. ”
“The fourth reinvention is a redefinition of the expected level of client service provided by a lead frame packaging solutions supplier. Our Asia factories are at the center of the global semiconductor supply chain – our on-the-ground factory and sales/service presence in Taiwan, Mainland China and Malaysia allows us to provide real-time assistance to our more than 50 Global Tier 1 clients in the IC design, OSAT and IDM space.“
Sustainable growth to improve shareholder value
In 2018, CWTC acquired Sumitomo Metal Mining’s (5713 JP) lead frame business, including its related technology and equipment; and has since relocated all manufacturing equipment to CWTC’s Kaohsiung factory in Taiwan. CWTC is now the second largest IC lead frame supplier in the world with a market share of 11% in the overall lead frame market and a share of 10% in the QFN lead frame market. The company’s goal is to raise its market share for both to 30% by 2025, replacing Mitsui High-Tec (6966 JP) as the world's largest supplier in both areas.
Chairman Huang is confident in CWTC’s ability to gain the No. 1 position in the global lead frame industry, “In the global lead frame industry, the top 10 companies account for 65% of the market while the top 5 manufacturers are the major players. Among these 5 companies, CWTC is the most profitable. Our Japanese peers are gradually exiting the lead frame business, and we are the only player amongst the top five to have such an aggressive expansion plan. We plan to increase our annual QFN lead frame capacity from 18mn in 2020, to 50mn in 2022 and then to 130mn by 2025. Far from being too aggressive, we feel that this expansion will be necessary to meet the future demand from 5G, artificial intelligence, electric vehicle and Internet of Things applications. By 2025, we believe that our share of the QFN lead frame market will increase to 30% from the current 10%, while our share of the overall lead frame market will increase to 30% from the current 11%.”
“The US-China Trade War changed the demand-supply dynamics of the entire lead frame industry, offering CWTC the opportunity to increase our market share. The construction of our new plant in Kaohsiung will be completed in the second half of 2022, with pilot production targeted for the fourth quarter of 2022. We will then be able to meet demand from clients in Mainland China as well as in global markets with capacity on the ground in Mainland China, Taiwan and Malaysia.” said Chairman Huang confidently.
“While we are expanding our capacity, we are also paying increasing attention to corporate sustainability and ESG. For example, we raised our use of recycled water from 13.6% in 2019 to 16% in 2021 and plan to raise it further in coming years. In addition, solar energy accounts for only 0.3% of our electricity consumption at our existing plants, but 4% of total electricity needs will be supplied by solar energy at our new Kaohsiung plant. We have also committed to comply with the Responsible Business Alliance (RBA), the Global e-Sustainability Initiative (GeSI) and Responsible Minerals Initiative (RMI) codes of conduct. We have also implemented ESH standards across our Asia factories. It is noteworthy that we are working on our CSR report this year and prioritizing the execution of our internal ESG initiatives at the same time that we expand our capacity. In doing this, we hope to ensure that our shareholder value creation efforts are truly sustainable over the long-term.”
Seeking to produce the highest return on investment amongst industry peers
Canon Huang is confident in the prospects for success of CWTC’s capacity expansion, saying, “I believe that we are in the early years of a sustained upturn in global semiconductor demand. We have made precise calculations regarding the projected efficiency of our capital expenditures. Starting this year, we estimate that for every dollar spent on capex, we’ll create 2 to 3 times that in revenue during the following year. Our accumulated experience and the technology-intensive nature of our R&D development over the past 30 years have allowed us to not only reinvent QFN lead frame solutions, but also to have a much higher capex efficiency than our peers. As a result, we expect our efficient use of capital will help us to generate revenue, gross profit and free cash flow growth well above the industry average between 2021 to 2025. We aim to deliver an ROE of greater than 20% and to achieve the highest returns on investment amongst our lead frame industry peers.“
Chairman Huang's plan to reinvent QFN and to execute an efficient expansion in production capacity is the foundation of his unique and profound vision: to pursue sustainable growth and become the world's largest IC lead frame supplier. As I walked out of the factory, the sun was still shining brightly in Southern Taiwan, as if to say that CWTC would continue to shine in this current semiconductor industry super cycle.
If you would like to arrange a meeting with CWTC’s Chairman Canon Huang, please contact yvonnehuang@qtumic.com.
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