Often we think that lens making is a material-centric, labour-intensive job. To take the comparative advantage of low-cost labour, some developing countries attempted to establish their footprints in this industry. In this age-old industry, developing the knowledge-based competence appears to be a challenging task. In the absence of low-cost labour, capital and government incentives, how a company can succeed in generating knowledge and translating it into technology to support lens-making innovation for developing competitive advantage appears to be intriguing. Over the last 35 years, Largan has demonstrated such competence in Taiwan. Along the way, Largan has become a role model of building knowledge-based firms even in conventional material-centric industry.
A lens making company among Forbes top 100 digital companies in 2018 is captivating indeed. High density, sharp images of iPhone or other high-end smartphone shine over Largan's aspherical plastic lens. Among the 17.5 billion optical components produced by Largan in 2017, Apple bought a lion's share. Apple is known to be frugal in paying component suppliers. But while Apple's 25 per cent net profit margin creates headline news, its relatively unknown component supplier Lagan's net profit quietly rises over 40 per cent, with $1.7 billion in sales.
LENS MAKING AN AGE-OLD INDUSTRY: Lens making is one of the oldest industries of the world, so does the making of the aspherical lens. Early attempts at making aspheric lenses to correct spherical aberration were made by René Descartes in the 1620s, and by Christiaan Huygens in the 1670s. Scientific knowledge of material and geometry in shaping optical properties of glass as well as plastic is quite established. Technology for cutting, processing and finishing plastic in giving the desired shape is also very conventional as well as widely available. Moreover, there has been immense competition among a considerable number of firms in producing lens. In the age of high-tech, creating a sharp competitive edge in generating as high as 70 per cent gross margin in such a material-centric production appears to be a significant challenge. Despite the high cost of labour and dominance of high-tech firms in Asia's Silicon island, Largan succeeded in reporting the highest earning per share among all listed companies in Taiwan-by producing apparently labour and martial centric components.
HUMBLE STARTUP WITH THE FOCUS ON KNOWLEDGE FOR A COMPETITIVE EDGE: With an investment of NT$10 million (BDT27 million), in 1987, Scott Lin along with his son Adam Lin Established a small plastic lens making company, Largan Precision Co. Ltd. in Nantun District, Taichung City of Taiwan. The two, father and son, had, and still have, the passion for technology; the father for the technology itself in pursuit of excellence, and the son for manufacturing processes, meticulous in his approach. They followed simple principles--no contracting, no purchasing of technology (intellectual properties, patents), and no poaching of talent from other companies.
At the age of 47, after quitting public sector job, Scott Lin started learning optics with the aspiration of building a business of lens making. He studied books on optical lenses and immersed himself in lens design technology, starting by drawing designs on paper. During the initial phase of his career journey, he carried four suitcases with him touring camera factories around Taiwan and global optics shows to show Largan's products and learn the business. His patience for waiting for seven years in getting his first order from Kodak helped build Largan's foundation. Instead of looking for a generous government subsidy or contract lens manufacturing opportunity, from day one, Lin was after acquiring the knowledge and building a competitive edge in lens making through proprietary knowledge by captivating in learning and R&D.
GLASS LENS MAKING DID NOT OFFER KNOWLEDGE EDGE BUILDING: In earlier days, Lin's insistence on home-grown R&D in developing competitive edge was arduous as technology in making glass lens had already matured. While he eventually received his first order, most patents for glass lenses remained in the hands of the Japanese as always, representing a huge obstacle that seemed unconquerable. Knowledge-based competitive edge development scenario started to change, while smartphones started demanding high-resolution, but very compact as well as low-cost lens assembly. Lin made the bold move in abandoning glass and throwing everything into plastic lenses-in developing the competitive edge through R&D in offering plastic camera lenses for smartphones.
MICROLENS ASSEMBLY FOR SMARTPHONE OPENED THE NEW WAVE OF PATENTS: Despite the maturity of knowledge and technology in glass lens making for conventional cameras, the growing demand of megapixel, very compact lens assembly of the smartphone was stretching the limit of lens making know-how. The gap of lens making knowledge and growing demand for higher megapixel smartphone cameras opened the opportunity to Lin's in-house R&D to acquire unique competence. Largan's R&D in plastic aspherical micro lens assembly started showing dominance in a new line of lens making patents. To develop a competitive edge through in-house R&D, making a plastic lens for the smartphone was the only opportunity for Lin as a matter of fact. Although perceived as a reckless move by the competitors, abandoning the past and developing plastic lens technology from nothing was the only success path opened to Lin's strategy.
FOCUS ON DETAILS AND ATTAINING THE EDGE THROUGH IN-HOUSE R&D IS THE KEY: Basically, Largan succeeded from Lin's passion and focus on details. Largan eventually rode its home-grown technology and high yield rates to become the dominant player in Taiwan's optical lens field. According to Nikkei, the company has established itself as the global leader in smartphone camera lenses with a global market share exceeding 30 per cent and more than 460 technology patents (as of 2016). With the saturation of developing competitive edge with new knowledge and patents in microlens assembly making for the smartphone, Largan is looking into repeating the success of microlens making for dual camera smartphone to multiple-lens systems, automotive lenses and contact lenses-new engines for future growth. Much like three glimmers of light next to two glistening light beams, these engines are slowly unveiling themselves to extend Largan's legendary aura as Taiwan's stock market king.
Largan has many lessons for start-ups and developing countries aspiring to increase per capita income through innovation. It's not about just tossing great ideas, the success in innovation depends on persistent generation of knowledge and turning it into product and process features-so that the quality keeps improving, while cost keeps falling--increasing both consumer and producer surpluses. Instead of just looking for volume and easy ramp up through subsidies and tax incentives, meticulous focus on details and creating knowledge for perfection is the key.
M Rokonuzzaman Ph.D is academic, researcher and activist on technology, innovation and policy. email@example.com
© 2017 - All Rights with The Financial Express