Tatung Co.

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Tatung Co.

22 Chungshan North Road, Section 3
Taipei 104
Taiwan
+ 886-2-592-5252
Fax: +886-2-591-5185
Web site: http://www.tatung.com

Public Company
Incorporated: 1957
Employees: 19,500
Sales: NT$84.7 billion (US$3.1 billion) (1995)
Stock Exchanges: Taiwan
SICs: 3679 Electronic Components, Not Elsewhere Classified; 2731 Book Publishing; 2711 Newspapers; 6512 Nonresidential Building Operators; 6514 Dwelling Operators Not Apartments; 6513 Apartment Building Operators

With ten domestic plants and nearly 20,000 employees, Tatung Co. is Taiwan’s leading manufacturer of consumer electronics. Having operated in the construction industry throughout the first half of the 20th century, the company entered into manufacturing after World War II. Tatung’s manufacturing expertise and product line evolved over the ensuing decades. Expanding from a base in small electrical appliances, by the late 1990s the company made a diverse array of products in three primary categories: computer and communication electronics, consumer electric appliances, and industrial electric products. As if that were not diverse enough, Tatung also dabbles in publishing, horticulture, and industrial coatings. By the beginning of 1997, Tatung’s Chunghwa (China) Picture Tubes subsidiary was the biggest manufacturer of cathode ray tubes (CRT) in the world, shipping over 20 million units. The company also sells more than one million television sets and 1.5 million computers each year. In addition to its substantial Taiwanese interests, Tatung has operations in the United States, United Kingdom, Germany, Holland, the Middle East, Japan, China, Singapore, and Indonesia.

Since its establishment in the 1910s, the company and its many affiliates have been led by members of the Lin family. In the waning years of the 20th century, Lin Wei-Shan, standard-bearer for the third generation, appeared poised to assume the chairmanship from his father, Lin Ting-Sheng, who had held that post since 1971.

Early 20th-century Foundations

The company originated in 1918, when founder Lin Shan-Chih established the Shan-Chin Business Association. At the time, the island nation of Taiwan was just beginning to emerge from the first phase of its modern economic history, a largely agrarian economy. As a construction company (and later a leading manufacturer), Shan-Chih played an important role in the second phase of Taiwan’s development, the creation of a basic infrastructure and the development of manufacturing industries. Over the course of its first 24 years in business, the company completed an average of 25 construction projects annually. Its most famous project was the Executive Yuan in Taipei, the seat of Taiwan’s national government. It was during this second cycle or “wave” of national economic development, which lasted roughly from the 1930s to the 1980s, that Taiwan would emerge as one of Asia’s “Four Tigers”—fast-growing economies that were heavily reliant on borrowed technology and enjoyed trade surpluses.

In line with Taiwan’s transformation into a manufacturing base, Lin’s company underwent its own metamorphosis in the 1940s and 1950s. Upon his 1942 retirement from the construction industry, Lin Shan-Chih endowed an unusual entity that combined educational and industrial functions. After liquidating the construction company, he apportioned 80 percent of his fortune to an entity called the Hsieh-Chih Association for the Development of Industry. Set up to promote the trades and provide a practical education in manufacturing and industrial management, Hsieh-Chih’s earliest projects included the endowment of professional organizations, industrial awards, scholarships, and vocational schools. Perhaps most importantly, the trust also invested in the establishment of Tatung Co. Literally “great harmony,” Tatung meant much more to the Lin family. As Shan-Chih’s son Ting-Sheng told Business Week in 1985, the name “means helping others”—enterprise in harmony with education. This duality would make Tatung a real-life workshop where students would apply the principles they had learned at the family’s vocational schools. Lin Ting-Sheng was named president of Tatung, while Shan-Chih assumed the role of chairman.

At first, students and employees at Tatung repaired train cars and performed other “odd jobs,” but by the end of the 1940s the company had established its first true manufacturing operation producing and assembling electric fans—a rather pressing need on this muggy subtropical island.

From the outset, Tatung adopted progressive business practices. In 1942, Lin Shan-Chih set aside ten percent of his personal wealth to fund an employee stock program. He instituted an employee welfare program in 1947, and the company set up the Tatung Institute of Technology in 1956, and inaugurated a publishing operation in 1959 and endowed the Tatung Vocational School. The company professes high ideals, including “to help create new Chinese culture by proper personal discipline, harmonious family relations, good school-company-factory management, wise government of a state and peace on earth.”

IPO in 1950s Presages Expansion

Tatung went public in 1957 and tapped the bond market a year later. Proceeds of these two issues financed the growing company’s forays into electric appliances and industrial electric motors in the 1960s. Tatung broke ground on a new plant in 1960 and refrigerators started rolling off the lines in 1961. The company added televisions and air conditioners to its offerings in 1964, and began manufacturing telecommunications products in 1966.

Lin Shan-Chih lived long enough to see his company grow to become Taiwan’s largest non-governmental concern; a conglomerate with more than NT$2.2 billion in sales by 1970. When he died in 1971, son Lin Ting-Sheng succeeded him as chairman and grandson Lin Wei-Shan advanced to the presidency. Lin Ting-Sheng has been active in politics as well as industry. As a member of the Kuomintang (KMT) nationalist political party, he was elected Speaker of Taipei’s city council in 1970.

Having made its first exports to the Philippines in the 1950s, Tatung expanded its overseas sales program to Japan in the late 1960s. Tatung initiated exports of fans to the United States in 1971, set up a subsidiary in California the following year, and inaugurated manufacturing at a plant in Los Angeles in 1974. The U.S. factory started out making fans, but had added televisions to its repertoire within two years. Tatung’s television sets won design awards and its consumer electronics were supported with advertising slogans like “Cat got your Tatung?,” but the brand never really caught on among Americans. During this decade, the company also expanded into the Pacific Rim, establishing subsidiaries in Singapore in 1972, Japan in 1975, and South Korea in 1979.

Computer Components Emerge As Key Products in 1980s

Tatung’s wide-ranging diversification continued through the 1980s, as the company added elevators, office furniture, and fax machines to its lineup. But perhaps most importantly, the company began to emphasize its ten-year-old computer interests, which included the Chunghwa Picture Tubes (CPT) subsidiary (founded 1970) and a joint venture with the Fujitsu computer company of Japan (established 1973). Originally created to manufacture cathode ray tubes (CRTs) for Tatung’s televisions, CPT’s expertise was harnessed for the production of computer monitors during this time. Like many other Taiwanese companies, Tatung built its business by forging OEM (original equipment manufacture) agreements with some of the world’s largest computer companies, including IBM. Under these arrangements, well-established firms like IBM contracted with low-cost manufacturers like Tatung to manufacture components (and eventually entire computers and peripherals) to IBM’s specifications.

By the end of the decade, Tatung was Taiwan’s largest manufacturer of computer monitors, and this segment had grown to contribute over 30 percent of the company’s revenues. There was one major caveat, however: the company relied on IBM for over 60 percent of its information systems sales. Tatung’s total sales had multiplied more than tenfold from about NT$2 billion in 1970 to nearly NT$29.4 billion by 1988.

Growth Slows in Early 1990s

By 1989, Tatung had evolved into a massive conglomerate with NT$31.1 billion in sales, a laundry list of awards and accomplishments, and subsidiary operations throughout the world. But Tatung had an Achilles heel that did not become apparent until Taiwan’s heretofore burgeoning economy hit a speed bump in the early 1990s. The company’s sales slid by more than ten percent from 1989 to 1990 and net income took an 85.7 percent dive. Tatung survived the recession better than many of its red-ink-stained competitors, but the economic downturn cast a spotlight on the company’s lack of innovation and brand equity outside its home country. Writing for Datamation magazine in 1992, analyst Carol Wei noted that Tatung’s “authoritarian management structure has hamstrung development staff and hampered marketing creativity,” a sad state of affairs for a company affiliated with some of Taiwan’s leading institutions of vocational education.

Company Perspectives:

To carry out the program of education-industry partnership with Tatung Institute of Technology and Tatung Senior High School, this company accepts investments from the schools and the general public for its sufficient source of capital fund and is organized and named as Tatung Company according to the Company Law.

By this time, Taiwan had entered what has come to be known as the “third wave” of its economic development, a time when a new generation of business leaders took the initiative. Instead of merely manufacturing products based on other companies’ trend-setting technologies, these entrepreneurs developed their own innovations, sold them under their own brand names, and reaped the profits that came with such risks. Whereas many of the nation’s other top technology firms had caught this “third wave,” Tatung seemed stranded on a sandbar—content to pursue alliances, joint ventures, and OEM contracts to expand its expertise and bring new products to its home markets. In 1991, the company inked an agreement with Packard Bell under which Tatung would provide the U.S.-based electronics marketer with 1.2 million personal computers annually, PCs that would be sold under the Packard Bell name. In 1995, Tatung’s Chunghwa Picture Tubes subsidiary arrived at a similar contract to make tubes for Toshiba’s large-screen televisions. A 1996 alliance with Honeywell built a $100 million semiconductor plant near the U.S. company’s Minnesota headquarters.

For more than 80 years, Tatung and its predecessor companies have been committed to four basic ideals: “honesty, integrity, industry, and frugality.” It appeared that the time had come for a new generation of leadership to add “branding” and “innovation” to the panoply of corporate emblems. By the 1990s, less than five percent of Tatung’s overall sales were generated by branded products. Third-generation Tatung president Lin Wei-Shan dedicated himself to increasing his company’s brand presence, vowing in 1992 that own-label sales would one day match OEM revenues.

In pursuit of that goal, the company expanded into the manufacture of clones, including network workstations based on SPARC (scalable-processor architecture) technology licensed from Sun Microsystems, Inc. Tatung launched its first-generation workstation in 1990 under the Mariner brand. The company introduced a line of built-to-order computers under the Unison label in 1995. Tatung was also among the first companies to license Macintosh’s operating system in preparation for launching Mac clones late in 1997. Though the long-awaited Macs promised low prices to consumers, some industry observers wondered whether Tatung and the other cloners would be able to effectively—and profitably—promote their derivative products in the highly competitive market.

Nevertheless, Tatung’s new strategies appeared to serve it well. Sales increased by a whopping 62.9 percent from 1992 to 1995, topping NT$84.6 billion in the latter year. Profit also increased dramatically, multiplying from NT$1.2 billion in 1992 to NT$6.6 billion mid-decade.

Principal Subsidiaries

Chunghwa Picture Tubes Co.; Taiwan Telecommunication Industry Co.; Forward Electronics Co.; Tatung Otis Elevator Co.; San Chih Machinery Co.; Tatung Fujitsu Co.; San Chih Container Terminal Co.; San Chih Coating Co.; San Chih Chemical Co.; Tatung Fujidenka Co.; Tatung Press Cast Co.; Tatung Chugai Precious Metals Co.; Kuen Der Co.; Tatung Forest Construction Co.; Hsieh Chih Industrial Library Publishing Co.; Tatung Horticulture Co.; Chunghwa Electronic Investment Co.; Tatung Electronic Co.; Taipei Industrial Co.; Taipei Electric Foil Co.; Tatung Co. of America Inc.; Tatung (U.K.) Ltd.; Tatung Co, of Japan Inc.; Tatung Science & Technology, Inc.; Tatung Telecom Corp.; Tatung Electronics (Singapore) PTE Ltd.; Tatung Electric Co. Of America Inc.; Tatung (Thailand) Co.; Tatung International Corp. S.A.L.; Tatung International (Deutschland) GmbH (Germany); Fuk Tatung (Thailand) Ltd.; P.T. Tatung Budi Indonesia; Tatung Netherlands B.V.