Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) is the world’s largest semiconductor foundry, and its success in dominating the semiconductor industry is due to its innovative approach and strategic investments. Founded in 1987, TSMC established itself as an industry leader by producing large-scale integrated (LSI) chips for the booming Information Technology industry. In the following years, the company began to pioneer the development of cutting-edge process technologies, such as 0.25 micron, 0.18 micron, 0.13 micron, and now the world’s leading 7nm process. Through such innovations, TSMC was able to remain ahead of its competitors and extend its lead in the semiconductor industry.
Among the most significant aspects that allow TSMC to dominate the semiconductor industry is its willingness to invest heavily in research and development to continually improve its process. TSMC has continuously made more significant investments in research and development since its founding, spending more than 18% of its total revenues in 2017 on research and development (R&D). This focus on R&D has enabled the company to remain ahead of its competitors in the semiconductor industry. For example, TSMC has stayed ahead of its competition for smaller transistors and process technologies. This has enabled the company to dominate in fabricating the most advanced chips for smartphones and other devices.
In addition to its emphasis on R&D, TSMC has taken strategic measures to ensure its dominance in the semiconductor industry. The company has made large-scale investments in advanced fabrication facilities, such as its 300 mm wafer fabrication facility in Tainan and its 12-inch wafer fabrication facility in Hsinchu. The company has increased its capacity through such investments and leveraged economies of scale to remain competitively priced.
Furthermore, TSMC also focuses heavily on vertical integration with its own fabrication facilities and supply chain. This has enabled the company to reduce its reliance on outside providers and better control costs and quality. The company can also adjust prices depending on market conditions and demand by controlling its production and supply chain. This has enabled the company to remain competitive in terms of price while having a more significant influence over the market.
Another factor that TSMC has effectively used to its advantage is the ability to work closely with customers. TSMC has developed strong relationships with many of its largest customers, such as Apple and Qualcomm, to understand their needs better. This has enabled TSMC to tailor its process technologies to meet its customers’ specific needs and respond quickly to changing market conditions. In addition, the company has also allowed customers to customize their products, further strengthening its partnerships.
By leveraging its strength in R&D, investments in fabrication facilities, strategic management of its supply chain, and the ability to customize products for customers, TSMC has achieved remarkable success in the semiconductor industry. As the world’s largest semiconductor foundry, TSMC’s performance has been extraordinary, and its dominance in the market is likely to continue for years to come.
- Chen, C., & Chen, D. (2018). TSMC’s success in dominating the semiconductor industry. Strategic Change, 27(2), 119-133.
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- TSMC (2020). Our history. Retrieved from https://www.tsmc.com/english/aboutUs/history/default.htm
- Forbes (2020). Taiwan Semiconductor Manufacturing Company. Retrieved from https://www.forbes.com/companies/taiwan-semiconductor-manufacturing-company/