How TSMC Came to Dominate the Semiconductor Industry

How TSMC Came to Dominate the Semiconductor Industry

By- Michael Megarit

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), with its innovative approach and strategic investments, is now one of the world’s premier semiconductor foundries. Established as an LSI chip producer for the Information Technology industry in 1987, over time TSMC became known for pioneering cutting-edge process technologies such as 0.25 micron, 0.18 micron, and eventually 7nm process technology development – innovations which allowed it to stay ahead of competitors while expanding its presence within the semiconductor industry.

One key element that has catapulted TSMC into dominating the semiconductor industry is its dedication to research and development (R&D). Since its founding, TSMC has made more substantial investments than rivals by devoting over 18% of revenues towards R&D alone in 2017. As a result, they remain superior competitors when it comes to small transistors and process technologies; giving TSMC an edge in fabricating chips for smartphones and other devices.

TSMC has taken strategic measures to maintain its dominance in the semiconductor industry. They have made large-scale investments in advanced fabrication facilities like their 300mm wafer fabrication facility in Tainan and 12-inch wafer fabrication facility in Hsinchu; such investments increase capacity while taking advantage of economies of scale for cost-competitive prices.

TSMC places great emphasis on vertical integration through its fabrication facilities and supply chain, which has allowed it to decrease reliance on outside suppliers while increasing control over costs and quality. By operating production and supply chains independently from one another, prices can also be altered depending on market demand, making TSMC cost-competitive while having greater influence in shaping market trends. 

TSMC has made great use of its ability to collaborate closely with its customers. The company has formed strong ties with Apple and Qualcomm – two major clients of TSMC – so as to understand their needs better and quickly adjust process technologies according to changing market conditions or tailor products specifically for individual clients, further solidifying partnerships.

By drawing upon its strengths in research and development (R&D), investments in fabrication facilities, strategic supply chain management practices, and its ability to customize products specifically for its customers, TSMC has achieved extraordinary success in the semiconductor industry. Their performance as the world’s largest semiconductor foundry has been remarkable and their dominance in this space looks set to endure for some time to come.

References

1. Chen and Chen (2018). TSMC’s Success in Dominating the Semiconductor Industry. Strategic Change 27(2):119-133.

2. SanJuan, E., Lopez-Noriega, I. & Fritzen, C. (2020). Key Drivers Behind Taiwan Semiconductor Manufacturing Company’s Success: Analysis from Taiwanese Management Data. International Journal of Innovation and Technology Management 17(3):1-11

3. TSMC (2020). Our History. Retrieved from

4. Forbes (2020). Taiwan Semiconductor Manufacturing Company. Retrieved from https://www.forbes.com/companies/taiwan-semiconductor-manufacturing-company/

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