COMPUTER NEWS & TRENDS Talking with Truly Semiconductors By Chris Hall      The majority of players within the flatpanel display industry pursue a strategy of ever-larger panels, cut from ever larger sheets, in pursuit of economies of scale. This is the “technology generation” treadmill, enabled by improved yields. An exception to this business model is Truly Semiconductors, headquartered in Hong Kong, with manufacturing facilities in Shanwei, Guangdong Province, China. Truly Semiconductors has preferred to stay focused on small displays of the kind found in mobile phones, digital cameras, digital photo frames and other portable devices. Today, as a specialist supplier of small flat-panel displays, Truly is strategically located to respond to surging demand within China and elsewhere.      EUROTRADE had an opportunity to speak with Paul Lewis, SVP for Business Development at Truly Semiconductors, in Hong Kong. Q: Truly Semiconductors was set up in 1991. Has your current business focus, the production of small displays for compact and portable devices, always been the business model, or has that evolved over time, as the market for small displays has grown? A: Stephen Leung, the chairman of the company, originally established Truly Semiconductors as a maker of desktop calculators. The company achieved quite a high position in the market, just at the time when the Japanese were starting to pull out of the technology, but there was a supply problem with the display, which was a standard TN display. He decided to build his own TN line, to ensure supplies of this critical component. That’s how Truly Semiconductors got started in displays, and interestingly enough, that’s remained the company’s focus. Today, LCDs account for about 85% of our total turnover, but we still make calculators. Q: Can we assume there’s likely to be considerably more growth in the small displays market? A: Absolutely. If you look at Truly’s success, a lot of the organic growth has been on the back of mobile phones from the indigenous Chinese handset makers. And that will continue to grow. Just about any application that was using a simple display is now moving to a color display with more functionality, communicating more information. Every month, I see new applications arriving where previously there might have been an LED, and now they want to put an LCD in it. So yes, an unequivocal yes. Q: That’s interesting because one tends to think of large TVs and so on being the LCD market, but Truly is an example of a company that has managed to base its business model on small displays, as I understand it. A: That’s right. There’s no intention that I’m aware of to invest in a move to that kind of market. Our strength is flexibility in customized and semi-customized solutions. A TV screen is a commodity, and I don’t think we’ll be venturing into commodity markets. Wide range of technologies Q: Truly Semiconductors is clearly capable of an impressively wide array of display technologies. Your website lists CSTN, TN, STN, FSTN, DSTN and OLED, for example, in addition to TFT LCD. What’s the secret to doing that? Has Truly, in the process, managed to invent its own methods and processes? Does Truly own many patents, for example? A: We have assessed the markets and looked at the technology. If you take Color STN as an example, we weren’t the first company to invest. We looked at the market and looked at the potential. We built a factory and moved in machinery. We learnt the technology with our consultants and engineers, and the community we already had. We now have a good, solid sound knowledge base in LCD technology, and we’ve managed, very quickly and efficiently, to industrialize the technologies in a way that is competitive, both commercially and technically. Q: So Truly has managed to do that at a pretty fast pace? A: Yes. The best example is that in March last year, I was at a meeting at the factory on a Saturday, and as I was driving back to Shenzhen, there were 63 trucks coming in the opposite direction, with containers carrying the TFT line. In June, we produced the first piece off the line. In other words, the factory, or rather the production line, was built and commissioned in just over 12 weeks, which according to my operations director is a world record. A factory is built in a matter of weeks, in China. Q: And that’s in Shanwei, Guangdong province? A: Yes, just 150 kilometers due east of Shenzhen. We have a 1 million-square meter site there, with good transportation links with Hong Kong, including a brand new highway. Our products are brought into Hong Kong and warehoused. They then go by air or sea from Hong Kong, depending on the customer’s requirements. Camera modules Q: You also offer modules, including compact camera modules (CCM), and touch panels, correct? A: Basically, the philosophy, being mobile-phone-centric, is to offer all of the components that surround the display. More and more mobile phones are coming out with touch panels. And virtually every mobile phone has a camera on it now. We also make our own FPCs and PCBs in-house, and those are also critical components. We’ve also opened up our own backlight factory. That’s because if you look at the bill of materials for a mobile display, the backlight is probably the most expensive component. It has to be very bright and very thin. Q: What is the technology you use for those backlights? A: Basically, ultra-thin side-firing LEDs, which are invariably Japanese, with a well designed light guide to diffuse the light and make it uniform. Often the LEDs are at the bottom of the unit, but have to illuminate the whole display, uniformly. So it’s smart design of a piece of plastic, essentially. Q: In the process, has Truly developed its own technologies? Does it have patented processes or products? A: Yes. We’ve got about 32 patents on the go at the moment. They are pending, with about 9 or 10 confirmed. Q: And your customers definitely see their need, their demand increasing, over the next two years? A: Absolutely. If you look at 2007, we don’t have the final figures, but I would say that between 60~65% of all displays shipped last year were TFTs. The line is still not yet big enough to meet that demand. We still need our supply partners for the TFT motherglass. But we’re in an unstable market at the moment with TFT, and if we can make the product on our line, the customer feels a lot happier and a lot safer because he knows he can have longevity of supply.      That applies particularly in Europe, where you have long design cycles and long lifetime products, and consequently we are asked to sign agreements that guarantee five years of supply. Q: In that case, can you say more about the actual relationship with the parent company, with Truly International Holdings? It sounds as though this Gen. 2 line was built very independently, from Truly Semiconductors’ own turnover. A: It was. Basically, in addition to Truly Semiconductors, we have Truly Assembly, which handles the calculator production, plus MP3 and MP4 players, designed and marketed under our own brand name in addition to being offered as an ODM service.      Then we’ve got Truly Industrial, which produces FPCs and PCBs. We sell those on the open market, but obviously the largest customer is their internal customer. Financially independent      The product divisions are basically financially independent of each other. My own assessment is that each division stands or falls by its own performance. Q: How do you achieve economies of scale? Are components such as controller chips and the glass itself a significant cost item for Truly? A: Yes. If you look at key components around the display, we pretty much make all of them ourselves, in-house. The only exception is the driver IC, but driver ICs are a very different market. If you look at some of the bigger IC manufacturers, they’ve set up their product divisions around TVs and multimedia at the high end, and then in the middle there’ll be mobile phone ICs, and then the very low end. All the supplies will be organized in that way. It’s a completely different market; it’s a volume related one.