The era of the New Economy in which phenomenal growth in AI, IoT, big data, and 5G has been galvanized by a variety of trends, including Industry 4.0, digital revolution, environmental sustainability, protectionism, the transparency and traceability of supply chains and energy transitioning, has revealed Far Eastern New Century Corporation (FENC) as poised to add a new chapter of remarkable performance to its 70-years of sustainable prosperity. By proactively undertaking transformational initiatives, we will overcome constantly-evolving challenges, while adhering to our overarching principles of sincerity, diligence, thrift, prudence and innovation.
The world economy entered 2020 with precarious prospects and mounting challenges on the heels of a tumultuous year punctuated by trade wars, the resurgence of protectionism, geopolitical skirmishes, growth deceleration in the world’s four major economies—the US, EU, China and Japan - and a seeming worldwide exhaustion of economic impetus. The COVID-19 pandemic has wrought havoc across the world. In the face of these unprecedented challenges, governments have attempted to contain the viral spread with border closures, but the resultant restrictions on human movement and transportation of goods have paralyzed economic activities from supply to consumption globally. The spillover effects of this pandemic not only threaten to derail the world economy, but have also put countries’ abilities to respond under the microscope. In March 2020, the world suffered a further blow when oil prices took a historic nosedive. Saudi-led OPEC and Russia found it difficult to reach a new deal and the Middle East’s complicated geopolitical conditions and an epidemic-triggered decrease in demand combined to cause the tumble in oil prices, which in turn brought about some of the toughest obstacles to business survival in recent decades. Politically, the United States’ trade dispute with China escalated into full-blown tensions on various fronts ranging from trading and finance to technology and human rights, which has jeopardized the stability of global supply chain. Massive protests against the government’s proposed amendment of extraditions laws in Hong Kong have drawn worldwide attention while Japan and Korea were embroiled in legal battles over the issue of forced labor during WWII, ratcheting up tensions in East Asia for several months. Developments during the lead-up to the US presidential elections in late-2020 and the results afterwards are expected to send ripples throughout the world. Financially, Brexit and Germany’s flat-lining economy have weighed down Europe’s recovery, while China, one of the world’s economic powerhouses, is mired in economic woes due to the coronavirus outbreak that erupted amidst the trade war with the US. Its economic growth continues to decline as exports plunged, consumption slowed and debts have ballooned and financial risks skyrocketed. However, this trade-triggered crisis is also projected to add fuel to China’s economic transformation focusing on high-tech industries and the digital economy and ushering in further deregulation of capital markets for foreign investors and substantial financial reforms. The world’s leading economies are at least on the same page with regard to monetary policies. The US Federal Reserve has preemptively lowered interest rates to sustain the economy. The EU central bank is once again implementing quantitative easing policies. Japan intends to keep interest rates in the negative territory. RTAs (regional trade agreements) dictate trading activities of the global market and CPTPP and RCEP have initiated negotiations for zero-tariffs among regional members, exposing international market participants to uncertainties. As the world economy starts to lose steam, Taiwan’s growth has also slowed. Facing threats from international trade conflicts and East Asia’s ongoing FTA-based integration, exporters can expect challenges, but, despite rising tensions across the strait, antagonism in domestic politics, policy uncertainty and the continuing brain drain, there are still a raft of reasons to be optimistic about Taiwan’s economic outlook. Internally, it has launched industrial upgrading across the board. In terms of management of external factors, it has managed to minimize the Covid-19 epidemic’s threat to public health, cushioning the economic impact, while recording massive inflows of capital from overseas and a resultant increase in investment amid the benefits from trade diversification efforts. Business opportunities abound as its development of industrial innovation accelerates. Environmentally, on the environmental protection front, climate change and resource depletion have underscored the urgency of continuing energy transition and the importance of sustainable development. This intensive pursuit of an environmental agenda is bound to rapidly enhance the maturity of the green energy industry.
FENC, as an enterprise headquartered in Taiwan but with a global footprint, aligns its strategic direction with the latest global trends. As one challenge after another arises in this hyper-connected world, we are constantly on the lookout for signs that foretell significant changes in the business environment and calibrate our positioning in the marketplace accordingly in order to reshape our corporate vision and mission. We will establish a solid foothold and stake a substantial claim in the new economy to demonstrate FENC’s ever-increasing value for years to come.
Founded in Taiwan in 1949 as Far Eastern Knitting Factory Co. Ltd, after developing into diversified businesses for decades, it was renamed Far Eastern New Century Corporation in 2009. FENC, with a record-high consolidated revenue in 2019, thrives in the Production, Property and Investments Businesses. With diversification across different industries, optimized property development and forward looking investment strategies, the Company’s management continued to deliver increases in both return on assets and return on equity. Solid performances were seen across business segments in 2019, the consolidated revenue reached NT$250.1 billion, a growth of 9% from the previous year due to the increased capacity of the Production Business, and net income of NT$16.435 billion. The net income attributable to shareholders of the Company is NT$10.733 billion, translating into a basic EPS of NT$2.15 based on the IFRS rule. The 23rd term Board of Directors in the 8th meeting proposed a cash dividend of NT$1.50 per share.
Production Business: Go Integrated, Go Global, Go Green
- Production Business: Go Integrated, Go Global, Go Green
A vertically-integrated network of petrochemical, polyester and textile operations management at its headquarters is the greatest competitive edge of the Company’s Production Business. Our streamlined system from raw material procurement to production, processing and sale has delivered a synergy that secures our leading position in the global market. Upstream, we retain a strategic control of petrochemical feedstock supply; midstream, we are the global leader in quality PET resin; downstream, our textile operations have helped us build strategic partnerships with world-class brands. We are the world’s second largest supplier of recycled PET (rPET), third largest in PET resin, Asia’ leader in PET sheet, world’s number one in both eco-friendly polyester filament and hygiene fiber, the world’s third largest in nonwoven fiber and Asia-Pacific’s largest producer of Nylon 6,6 filament for apparel usages. These exemplary performances have put us in the ranks of the world’s top five polyester manufacturers.
- Establishing a global presence and developing a solid foothold in countries of business operations
As the Company deepens roots in Taiwan, it has also branched out to China, Southeast Asia, Japan, Vietnam, and the United States to build a network of production and sales facilities around the world. This synergy of global operations accentuates its competitiveness in agile adaptation and swift crisis-responsiveness. The implementation of RTAs has accelerated the relocation of supply chains, we have been able to make timely adjustments, fending off the threats in this wave of regional economic integration while capitalizing on the opportunities. APG Polytech was set up in the State of West Virginia in 2018 as our first PET production site in the United States to gain advantages in raw material and energy costs and directly supply the American domestic market without trade barriers. In collaboration with two other multinationals, we built the largest integrated PTA-PET facility in the Americas. To add value to APG Polytech’s products and thereby raise the Company’s competitiveness in the US market to an even higher level, in 2019 we acquired Phoenix Technologies International, LLC, a recycled PET producer located in Ohio. The multi-phase expansion of our vertically-integrated production site in Vietnam over the years has helped us to secure a tariff advantage in international trade. With the completion of Phase I, a capacity of 400,000 tons has been added to PET production and a knitting, dyeing and finishing plant is now up and running. Phase II expansion is also underway to increase production of polyester filament and staple fibers. In addition, to secure its involvement in the circular economy, the Company has also expanded the second line of its recycled PET plant at the existing location in Japan and plans to set up another production site in a further location.
- Standing out from the competition with an environmental commitment paving the way to a successful global green economy
The Company is a leading pioneer in green polyester and textile technology whose dedication to research and development of innovative manufacturing processes for recycled products dates back more than 30 years. Not only have we been broadening the scope of applications for green materials and scaling up production, but we have also managed to establish an international green network of recycled PET production with a total capacity ranking at the top of the industry and operations extending from Taiwan to Japan, the United States, the Philippines and Vietnam. Our green products are all certified to rigorous standards and well-received by international brand owners. Our customers are served with TopGreen® Recycling Solutions. As an example, we have partnered with Adidas and Parley for the Oceans, an environmental NGO, in a joint project as Adidas’ exclusive supplier of ocean-recycled materials to turn ocean waste PET bottles into eco-friendly yarn. In addition, we successfully developed FENC® TOPGREEN® Membrane, the world’s first waterproof breathable polyester membrane made from recycled material, which was awarded Top 10 at ISPO Textrends 2020. FENC has the honor of serving as one of the role models in the industry to help build a global green economy.
- Staying innovative with continuous commitment to R&D and maximizing brand value with lucrative intellectual property
FENC has a top-notch R&D team of more than 200 people devoted to high-end innovation and the improvement or development of polyester materials, fiber& textile, new materials and biotech & energy. We aspire to build the most powerful R&D capability in the industry here in Asia. This team in Taiwan can also access the resources and expertise of the Company’s American R&D center in the State of Ohio and the two can collaborate on innovative projects. This has worked seamlessly with the management of the Company’s Production Business and developed many upscale products and technologies, which have translated into billions of NT dollars in additional revenue. We have received numerous honors, including two Top Ten awards, two awards of Selection, and a Sporting Innovation Award at ISPO Textrends 2020(Munich), the world's largest sports exhibition, with FENC®DynaFeed®, the world’s first smart clothing that we developed jointly with NMES Group AB. In 2019 we contributed to sustainable development by introducing Asia’s first bio-based gas barrier PEF bottles for carbonated soft drinks and beers and APR-certified (the US Association of Plastic Recyclers) polyester shrinkage film. The Company has a valuable portfolio of 794 approved patents.
- CSR model enterprise thriving on sustainability
The Company has an impressive track record in CSR, recognized around the world. We earned many great honors in 2019 Global Corporate Sustainability Awards (GCSA) and Taiwan Corporate Sustainability Awards (TCSA), standing out as GCSA’s only World Class winner for Outstanding Practices in the category of Best Practice Award and collecting seven TCSA titles, including Taiwan Top 50 Corporate Sustainability Awards, Corporate Sustainability Report Platinum Awards, English Report Gold Awards, People Development Awards, Climate Leadership Awards, Growth through Innovation Awards and Circular Economy Leadership Awards. We were also recognized in 2019 by Taiwan’s CommonWealth Magazine for Excellence in Corporate Social Responsibility and won consecutively Grand Prize in the Traditional Industrial Group and for the first time Model Award for Environmental Friendliness with our project of sustainable production in the Global Views Monthly’s CSR Annual Survey. In addition, FENC is included in the FTSE4Good Emerging Index, TWSE Corporate Governance 100 Index, and Taiwan Sustainability Index, selected as an “A-Level” constituent of the MSCI ESG Leaders Indexes, and ranked in the top 5% of the listed companies in the Corporate Governance Evaluation conducted by Taiwan Stock Exchange. These recognitions qualify FENC as a role model for corporate Taiwan.
Investment Business: Broadening Investment Portfolio for Robust Profit Growth
In order to effectively mitigate market volatility risks and secure stable profits, FENC has built a diversified investment portfolio that ranges from cement production, department store retail chains, telecommunications, financial and banking services, land and sea transport to construction. Our invested businesses are listed companies with an outstanding record of reliable stewardship of investors’ capital, including Far EasTone Telecommunications Corporation Limited (FET), Asia Cement Corporation (ACC), Far Eastern Department Stores Limited (FEDS), Oriental Union Chemical Corporation (OUCC), and Far Eastern International Bank (FEIB). They not only generated significant revenues and earnings in 2019, but are also pursuing growth with forward-looking and innovative strategies. FET has aggressively tapped into the new economy with a focus on 5G digital solutions, having secured optimal 5G bandwidth. It plans to build the most comprehensive 5G coverage in the country with a combination of low, medium and high bands, so as to successfully launch AR/VR, 4K/8K ultra-high-definition audiovisual streaming services. It is also committed to utilizing its strong capabilities in big data, AI and IoT as the core competencies essential for corporate transformation and industrial upgrading. ACC’s significant growth in earnings thanks to its remarkable performance in China has been recognized as FENC’s record-high investment income. It has undertaken great efforts to transform into an environmentally friendly company. FEDS intends to advance its dominance in the sector of department stores by engaging intensely in smart retail with the latest technology. Its innovative operations are certain to fortify its iconic stature in Taiwan’s retail industry. Taipei’s Xinyi A13 is an intelligent shopping mall that connects consumers to fashion and the Chubei New Century Shopping Mall is scheduled to open next year. Our invested companies are managed by teams who demonstrate both innovation and vision while seeking to grow their businesses, and thereby capture the best market opportunities and deliver maximal profits for the company
Property Business: Developing Properties with Flexible Strategies to Maximize Value
To actualize and increase the return on land resources, the Company has been active in real estate development, rental and sale, and property management. Our signature projects are located in premium areas of Greater Taipei, including Taipei Far Eastern Telecom Park (Tpark)—a hub for ICT and intelligent technology industries in Banqiao, Taipei Far Eastern Plaza—office buildings in downtown Taipei, and Mega Tower—the tallest skyscraper in New Taipei City that houses one of FENC’s shopping malls, Mega City. These have boosted local economic prosperity and raised the land values in nearby areas. Tpark’s first-completed office building, TPKA, is now fully rented and occupied. The second one, TPKC—FET’s cloud computing center, won a Platinum Award in Excellent Intelligent Green Building Design Class in the 2019 TIBA Awards (the 3rd Taiwan Intelligent Green Building and System Product Awards). The third one, TPKD, is Google’s innovative Engineering Hub, which is anticipated to bolster New Taipei City’s economy, bring prosperity to local communities, create employment opportunities, foster an overall industrial upgrade and raise Taiwan’s visibility in the world. A building permit has been issued for the construction of the fourth building, TPKE, which is scheduled for completion in 2022 followed by transfer to the tenant. The premium residential project located in Tpark has a gross floor area of more than 7,000 pings (23,140 m2) for sale and is expected to generate a significant income. In addition to the project in Banqiao, we have also applied to Taoyuan City government for land rezoning of our old textile plant in Neili to fit into the city’s urban renewal program. It will be converted into a branch of the Far Eastern Memorial Hospital in Taoyuan City and become a locus for the biochemical and pharmaceutical industries and join the artistic architecture on the campus of Yuan Ze University and Far Eastern International Convention Center as one of the new landmarks in northern Taiwan. The management of Far Eastern Resources Development Corporation is committed to maximizing the value of our assets and invigorating the local economy with our development projects. We believe that the appreciation in land value will continue to yield nutrients essential to the growth of FENC’s operations across the board
Business Goals and Prospects
The Company proceeds with a strategic vision on a path of solid growth, thrives on the trends of the world economy and trade development by harnessing advanced technologies. We continue to stride towards the goal of sustainable development by drawing on our strengths in innovative thinking, superior know-how and excellent management.
- Seeking the Leap through Expansion, Optimization, and Diversification
The Company has been implementing a comprehensive set of transformational strategies, including global deployment of production bases, product optimization, and collaboration with world-class brands to achieve our own leap. In recent years, FENC’s Production Business includes Taiwan, China, Vietnam, the United States, Japan, and Southeast Asia. This continuous global expansion has enabled the Company not only to increase profits with increased capacities but also to mitigate risks associated with any particular geographic location. As for product development, in addition to optimizing our products in general, we have been increasing the proportion of distinctive products in the product mix to burnish our brand image as a high-tech green enterprise. In terms of customer risk management, while remaining dedicated to consistent reinforcement of our existing core customer base, we have also been proactive and persistent in initiating cooperation with partners that command global brand recognition so as to minimize the risks stemming from a homogenous customer base. The aforementioned strategic moves have been undertaken to put the Company on the map with an integrated network of production and sale around the world.
- Overcoming Challenges with Holistic Risk Management
In the face of a global crisis, the Company has activated a highly-efficient mechanism for risk management that responds timely and comprehensively. In anticipation of the global economic chaos triggered by the coronavirus pandemic, we immediately set up an emergency response taskforce within the organization to stress-test our business operations. On the side of supply chain management, we can obtain real-time information on supplies to keep adequate amounts of feedstock and merchandize in inventory. We also adjust our capacities in a timely manner according to market demand and coordinate the supply chains in different geographic locations so that our customers do not need to worry about any disruption in supply. A steady and reliable delivery of our products adds to our competitive strengths. On the financial side, the Company controls its cash flow effectively and possesses sufficient funds to exempt us from any cash flow risk. Finally, on the side of receivables management, we monitor our customers’ status of operation and credit ratings very closely to ensure a secure and reliable collection of payments. Despite the capricious nature of today’s business climate, the Company’s management remains responsive and resourceful under enormous pressure. FENC’s robust system of holistic risk management guarantees that the Company will ride out the economic storm stronger than ever.
- Driving Innovation with Advanced Digital Technologies
The Company has set up a team in charge of intellectualization to unlock business opportunities through digital transformation and set aside a budget of NT$1 billion to make our Production Business more intelligent. We have formulated strategies for AI application in production operations in combination with mobile communication, big data, cloud computing, IoT and blockchain. We have decided to implement AI and Industry 4.0 on production sites. We will build AI-based active energy management systems (EMS) in our petrochemical plants, introduce smart electricity management systems and intelligent quality control systems to polyester plants, and install EMS and robotic process automation (RPA) in textile plants. The administration at FENC headquarters has adopted a series of measures to speed up the transition to intelligent management, which include implementing AI programs, building an integrated big-data platform, operating OCR (optical character recognition) with the support of big data and filing export custom declarations with RPA.
- Maintaining our Lead in the Green Economy with Increased Production of Eco-friendly Products
The Company set up a strategic green material unit to help the green economy grow. We aim to go green in sourcing of raw materials, product design and manufacturing processes. We also strive to move up on the global green value chain through collaboration with international customers. The tangible results of our effort include the world’s first FENC® TOPGREEN® Bio3-PET HTY (a third-generation biomass feedstock High Tenacity Yarn), specialty chemicals from recycled PET, textile chemical recycling technology, etc. By 2023, FENC plans to have the world’s largest rPET capacity and highest number of certifications for food packaging applications. We also plan to raise the proportion of recycled products to more than 30% of the PET capacity by 2025 and are seeking actively to set up production sites in various locations around the world to bring up the total capacity and solidify our leadership position in the market.
- Achieving Sustained Growth through Managerial Excellence
The Company takes the development of a new generation of management talent and brain trust that coordinates its strategic expansion around the world very seriously. Great minds are brought together as a team from Taiwan and overseas to create managerial synergy that sustains excellence in business competitiveness. Their attention is focused on various facets of our operations, including financial planning, risk management, R&D, legal compliance, environmental protection, information integration, mobility management, cost control, energy efficiency, employment safety and health, etc. With a corporate culture conducive to innovation, we survive the vagaries of the business climate with exceptional nimbleness to adapt and thrive in the face of impending challenges. For example, we have implemented a project in accordance with the Task Force on Climate-Related Financial Disclosures(TCFD) guidance and rolled out a program of loss prevention across various production sites. Our professional management team takes an accurate pulse of the economy and adapts the Company’s operations accordingly to achieve growth in diverse ways.
- Creating Commercial Successes with Customized Technology & Solutions
To realize the Company’s vision for sustained growth, the R&D team is keen on pursuing promising technologies and versatile applications, such as eco-friendly materials, highly-functional materials, and smart textiles, etc. In order to further draw on the integrated research capabilities and core specialties in the textile business unit, in 2019, IDM (Innovation Direct to Market), a new platform consisting of seven technology platforms for green products solutions, was set up to work alongside COLAB (a product design center) to develop top-of-the-line products and turn them into great commercial successes, with the support of our customized technological platform under collaborative projects with various brand clients and so vastly speed up the commercialization of these new consumer focused product solutions. The Company also plans to cooperate with the FE Group’s academic institutes on development of new technologies in the future. It will also seek cooperation in research on bio-based polyester, eco-friendly materials, high-end functional fibers, and footwear materials with Taiwan’s Industrial Technology Research Institute, Taiwan Textile Research Institute, and Footwear & Recreation Technology Research Institute.
Advancing Social Well-being through Charitable Causes
The Company has endeavored for more than half a century to serve the public interest in three major areas—education, healthcare and charity. This work is carried out by three schools, two medical institutes, and three foundations respectively. In the field of education, FENC upholds the conviction that quality education is the most valuable legacy for future generations. Yuan Ze University shoulders the responsibility of cultivating talent for the country, upgrading itself with digital innovation and aligning its teaching practices with global standards in expectation of joining the ranks of world-class universities. At the forefront of healthcare, the Far Eastern Memorial Hospital continues to excel with innovative medical technology; our medical professionals’ remarkable contribution and performance have been recognized with the National Quality Awards and National Innovation Awards. In pursuits of philanthropy, the Far Eastern Memorial Foundation sponsors a wide range of arts and cultural events; the Far Eastern Medical Foundation provides generous grants for medical research and healthcare assistance; the Y. Z. Hsu Science and Technology Memorial Foundation hosts annually the Y. Z. Hsu Science Awards, honors outstanding performances in three categories, namely Y. Z. Hsu Science Chair Professor, Y. Z. Hsu Science Paper Award, and Y. Z. Hsu Technology Invention Award, and fosters domestic scientific research and development. It promotes and incentivizes domestic innovation in various fields, including nanotechnology, ICT, optoelectronics, biotechnology & pharmacology, green technology, and newly additional artificial intelligence in 2019. Three foundations also play an instrumental role in Taiwan’s progress on various fronts, ranging from the economy, architecture, arts, education, and culture to culinary service, making society more benevolent and beautiful. In addition, FENC hosts an annual marathon in Taiwan to spark enthusiasm for fitness among the public. In 2019, the Company launched a charity campaign called “70 Years of Love, FE HAPPY GO.” In celebration of FENC’s 70 years of establishment in Taiwan, we have planned a series of events to further public interests in seven categories, ranging from arts and culture, environmental protection, education, healthy lifestyle, social engagement, community care, and commitment to consumer welfare, and actualize our belief that FENC works “Together for a Promising Future” with everyone in society.
As with its achievements over the past seven decades, FENC will continue to rise above competitors with differentiating and innovative strategies. The Company will keep up its proven success in the Production Business with renewed core competencies and expand the market presence of its investments across different industries with renewed ambition and vision. In the era of the new economy, we will leverage the latest technologies and groundbreaking discoveries to quickly expand in to new markets and business territories. We will secure sustainable growth with upgraded business models and herald “A New Far Eastern Beyond 70.”