Being the daughter of Taiwan's leading industrialist has a few disadvantages. Charlene Wang, 45, president of First International Computer Inc., has spent decades trying to maintain autonomy from her father, Y.C. Wang. The 87-year-old chairman of sprawling Formosa Plastics Group has a passion for controlling every facet of his business. Indeed, Charlene founded FIC in the early 1980s in large part because it wouldn't interest her father, who saw no reason to enter the electronics business. "The safest thing was to go into something he knew nothing about," she says.

But a decade later, her company has snowballed into a $600 million producer of personal computers and their motherboards--and the old man is taking an active interest. Facing increasing environmental constraints in the petrochemical field, the Wang family is now determined to become a global leader in information processing. FIC is taking the lead, backed by $6.7 billion Formosa Plastics, which is risking nearly $1 billion on memory chips, liquid-crystal-display panels (LCDs), and a mammoth computer factory in China.

BIG CHANGE. The moves are being spearheaded by a new generation of Wangs (no relation to the family behind ill-fated Wang Laboratories). Educated in top Western universities, Charlene and other offspring of Y.C. Wang--such as son Winston and daughter Cher--are presiding over some of the family's fastest-growing businesses. Winston, vice-president of subsidiary Nan Ya Plastics Corp., has advanced into electronics materials and printed-circuit boards (PCBs). Cher, president of PC maker Everex Systems Inc., is pushing the family into the U.S. market. In the process, they have converted their father to the virtues of electronics. "He's seen what we've accomplished," boasts Winston.

By the time all the pieces come together five years from now, the Wang family companies could have combined electronics sales of $4 billion. "They will be one of the most integrated computer companies in Asia," predicts Daniel A. Heyler, a Taiwan-based analyst for Dataquest Inc.

That would represent a big change for Taiwan's entire economy. Its $10 billion information-technology industry has been driven by small players with sales below $200 million. Taiwan's most powerful tycoons have long stuck to shipping, cement, and petrochemicals, leaving costly research and development to the government. Not surprisingly, Taiwan relies on Japan for most electronic components. Due largely to imports of liquid-crystal displays, memory chips, and disk drives, Taiwan's trade deficit with Japan has swelled 60% in the past two years, to $16 billion.

But Taiwan's model has reached a turning point as companies face intense pressure to move into higher-value-added industries. Makers of garments, toys, and shoes--once the biggest downstream buyers of Formosa Plastics products--have fled to low-wage havens in China and Southeast Asia. Moreover, the abysmal pollution record of Formosa Plastics and other big groups is under attack. As a result, big steel and paper manufacturers also are looking to electronics as a way to diversify.

The Wangs also will encounter competition from many of Taiwan's biggest electronics players. Subsidiaries of Chunghwa Picture Tube, TECO Electric & Machinery, and United Microelectronics plan to make LCDs for notebooks. The $1.9 billion Acer Group aspires to quadruple sales by the end of the decade by supplying PCs, components, and chips to the likes of Canon Inc. and Apple Computer Inc. While the coming battles will be brutal, many analysts are betting that the Wangs will succeed because of their financial muscle and family ties. "If Formosa Plastics can't succeed," says analyst Dickson Ho of W.I. Carr (Taiwan) Ltd., "nobody in this country can."

Why are analysts so confident about the group's financial power? One reason is that Formosa Plastics has solid backing by government-run banks. And its stated $12.3 billion in assets includes vast real estate holdings that haven't been revalued in decades. Moreover, Formosa Plastics Corp., the group's flagship, is laying out $9.5 billion for a huge petrochemical complex that is expected to generate revenues of more than $7 billion annually by 1998. It recently opened a $1.6 billion project in Point Comfort, Tex., and wants to invest billions more in China.

SERIOUS MISDEEDS. Yet the Wangs realize that there are limits to petrochemical expansion. In Texas, Formosa Plastics Corp., the group's flagship, was fined a record $4.3 million by the Environmental Protection Agency three years ago for mishandling hazardous waste, and the company has been cited for dozens of worker-safety violations. Formosa has canceled plans for a controversial $700 million rayon plant in Louisiana. Meanwhile, widespread criticism in Taiwan and bureaucratic delays in China forced Y.C. Wang to pull out of a planned $7 billion petrochemical zone in the mainland two years ago. Company revenues have stayed stagnant, at around $1.2 billion, since 1991.

That's why electronics is seen as a new avenue of growth. Formosa executives believe their corporate culture has prepared them to survive intense competition. For more than four decades, Y.C. Wang has fostered a fanatical devotion to cost-cutting. He pressures managers to squeeze costs through financial incentives and sheer intimidation. The chairman is assisted by a cadre of 200 auditors--nicknamed the Red Guards for their tenacity.

The children have maintained many of their father's frugal ways. All 10 of them--and their spouses--are executives in family businesses. The families of Winston, Charlene, Cher, and Margaret Wang (a 47-year-old manager at Nan Ya) live in a seven-story apartment block in Taipei. Each Sunday, they dine with Y.C. Wang at his penthouse atop the hulking headquarters of Formosa Plastics. Out of deference to their father, who was in his 80s before he agreed to fly business class on trans-Pacific flights, the children avoid being chauffeured except when on business.

From the time his children were young, Y.C. Wang was determined that they not live sheltered lives. He insisted that they learn to live frugally. At one time in the 1970s, seven of them shared the same apartment in London. Charlene was charged with managing their allowance: five British pounds a week. The children were not allowed to be driven to school or to stores. "My father felt we should know the value of everyday life and how to live independently," says Cher. While attending high school in Berkeley, Calif., she lived with a family, helping with the cooking and cleaning.

CAPITAL ADVANTAGE. Those lessons from Dad were to come in handy. Charlene and her husband, Ming J. Chien, returned to Taiwan in 1980 and established the computer company, while Cher and her future husband, Peter Ow, sold their PCs in the U.S. The company produced IBM clones under its Leo brand, marketed mostly in Asia, and as a contractor for European computer companies. Business took off in 1987, when the Wangs moved into motherboards, the main circuit cards at the heart of every PC. They were among the first to recognize that Taiwan, with its inexpensive engineers and designers, could be a power in motherboards. FIC had another big advantage: access to capital. Although Charlene says she never accepted money from her father, his guarantees were critical in raising loans from Taiwan's risk-averse banks.

That enabled the business to move into high gear after the PC price war in 1991. Everyone from Unisys, AT&T, and ICL started sourcing them from Taiwan. With its cheap, reliable supply mf circuit boards from Nan Ya Plastics and production lines that turn out 2.4 million boards a year, FIC drove out smaller competitors. Two years ago, there were more than 400 motherboard producers in Taiwan. Now there are around 30. "They had the money for economies of scale when others were hurting," says Robert Lo, Intel Corp.'s Taiwan manager. "And because they are family-controlled, they could keep a close grip on costs."

ANTICIPATION. Meanwhile, the Wangs built a team of 50 engineers to develop new boards loaded with the latest features. Because it buys in huge volume, FIC works closely with suppliers before they launch next-generation chips. When Intel unveiled its Pentium microprocessor last summer, for example, FIC was ready with boards for Pentium-based systems. "As soon as we come out with a new product," says Intel's Lo, "they're right behind us, ramping up production."

Still, the motherboard sector has limits. Even though Taiwan's sales of motherboards soared 54% last year, the average price plunged from $176 to $101--and it's still falling. The company's profit margins are just 3.5%, and analysts predict that earnings from motherboards will be flat this year, at around $8.5 million. "They need to put their emphasis on more high-growth areas," says Andrew Hubert of Masterlink Securities Taiwan.

One such area is notebook PCs, a $1.7 billion industry in Taiwan that is expected to grow by 70% over the next two years. By yearend, FIC hopes to produce 20,000 notebooks a month and become a top supplier to original-equipment manufacturers.

Heading the effort is Horace Tsiang, who until 1991 was in charge of research and development at Wang Laboratories Inc. in the U.S. His first product: a notebook computer in which all major components are detachable. The screen, modem, hard drive, and motherboard pop in and out and can be replaced with upgrades. Competitors such as NEC Corp. already market notebook computers with detachable modules, which make upgrades and repairs easier. But FIC's Leo notebooks, which range in price from $1,500 to $3,800, take the concept to the next level.

SHANGHAI EXPRESS. The Wangs' game plan is to be more than a supplier of assembled systems. They also want to be a mass-volume producer of modules for dozens of computer brands. The goal, says Chairman Chien, is to "be one of the most important subsystem suppliers in the world." This helps explain the company's buildup in China. FIC makes color monitors and motherboards in Guangdong province. By next year, it will be producing up to 150,000 motherboards and up to 70,000 PCs per month at a sprawling site the Wangs recently purchased near Shanghai.

In fact, the group's approach to PCs follows the same pattern that Y.C. Wang established in chemicals--vertical integration, high production volume, and state-of-the-art automation. The young Wangs are extending that strategy to electronics. With Nan Ya supplying LCDs and dynamic random-access memory chips (DRAMs), the company won't be slowed by the chronic shortages of Japanese supplies and sudden price hikes that have hampered Taiwan's notebook industry. Likewise, Nan Ya intends on being a low-cost producer in DRAMs, as it has been in chemicals, printed-circuit boards, and motherboards. It expects to supply the voracious demand of other Taiwanese computer makers, who last year imported $500 million worth of LCDs and $3 billion worth of DRAMs--mainly from Japan.

The strategy is risky. While Taiwan's government wants companies to reduce their reliance on Japanese imports, Taiwanese suppliers still must have competitive prices. If not managed tightly, the Wangs' vertical-integration plan could end up adding to their costs, since the burden of making so much themselves could force them to charge a premium for their DRAMs and PCs. Moreover, being vertically integrated didn't help many Japanese companies withstand competition from more narrowly focused rivals.

None of those concerns is holding the Wang family back. In November, they seized an opportunity to grab a U.S. foothold, when family members paid $2.3 million to rescue Fremont (Calif.) computer maker Everex Systems from Chapter 11. Everex, which had annual sales of $433 million at its peak in 1992, was regarded as an innovator in high-end, multiple-user PCs. It also had more than $2 billion in contracts to supply the U.S. government and the Army. But Everex' heavy spending on research and development and high overhead proved fatal during the PC wars. The Wangs picked up its highly regarded brand name, the government contracts, and a 1 million-square-foot factory in Fremont.

The Everex acquisition presents perhaps the most challenging test of the second generation's business acumen. Instead of steamrolling the competition in a commodity business, the younger Wangs will have to prove they can compete in marketing savvy and customer service. Longtime veterans, such as Acer Corp. Chairman Stan Shih, wonder if the Wang family's management style can adapt. "Money and mass production are important," says Shih. "But do they have the corporate culture to respond to rapid changes in technology and for managing people in a dynamic way?"

"INTERFERENCE." The answer will depend largely on what kind of imprint the children can make on the group's businesses. Y.C. Wang likes to grill group managers on the prices of everything from refreshments at company functions to toilet paper used at a company-owned hospital. "Every day, he finds some problem," Winston says. "Interference is the word."

Yet Winston has had some success in winning his father's confidence. Last year, he convinced Y.C. that products such as PCBs, chips, and LCDs have a lot in common with Formosa's traditional commodities businesses, where the winners are determined by efficiency and raw-material costs. The electronics business accounted for 9% of Nan Ya's 1993 sales of $2.4 billion and profits of $250 million. Over the next two years, sales in the electronics businesses should grow by about 45% and profits by 38%.

Thanks to those numbers, Winston's siblings say he has grown more self-confident and assertive--and his father is doing less second-guessing. Winston's solid performance also has won the respect of his Taiwanese peers. "Winston is very proud, but [his pride] is well placed," says an executive at a rival chemical company.

Under Winston's direction, Nan Ya has begun to produce 9- and 10-

inch monochrome liquid-crystal-display screens for notebooks and is looking to license the technology to make more advanced thin-film transistor (TFT) color panels. Nan Ya has budgeted some $500 million for a wafer fab and signed a technology-transfer agreement with Japan's Oki Electric Industry Co. Considered one of Japan's second-tier players, Oki Electric needs cash, which allowed Nan Ya to strike a more generous technology-transfer deal. The two companies will produce 8-inch wafers for 16-megabit DRAMs by 1996 and collaborate on the development of next-generation chips.

That leaves the Wangs years behind Japanese and Korean rivals in 16-megabit chips, which means that Nan Ya won't snare the big profits that come at the beginning of a high-tech product cycle. But demand for 16-megabit chips will remain strong after 1996, so analysts say Nan Ya should make decent profits if its efficiency is good. The bigger test of its financial staying power--and ability to compete in the big leagues--will be in 64-megabit chips.

LONG LETTERS. The other big future concern is the succession to founder Y.C. Wang. Some industry analysts speculate that he is grooming experienced advisers to take over until his children are older. And some parts of the group may not support the younger generation's high-tech adventures. "No matter who takes over, no one will have the same stranglehold on the group," says a Western chemical executive in Taipei. "His shoes will be hard to fill."

Still, the family has solid control of most group companies through a maze of cross-holdings. So most analysts assume that a Wang--probably Winston--will be in charge.

As a result, Y.C.'s legacy is likely to be felt for decades to come. When his children were studying in the West, Y.C. wrote them long, handwritten letters filled with advice on everything from personal lifestyles to managing a chemical plant. "I was just a teenager," recalls Cher. "I had no idea what he was talking about."

Now, as the children of Y.C. Wang plunge into industries in which small mistakes can mean huge losses, those lessons will be more valuable than ever. How well they translate from smoke-belching chemical plants to computer clean rooms could determine whether or not the Wangs build Asia's next high-tech dynasty.

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