TSMC dossier (10): Prepare for rainy days and never slack off

Colley Hwang, DIGITIMES, Taipei 0

According to the ancient Chinese thinker Zhuangzi, persistence on building up competence over time is the only way to earn people's trust. Taiwan, with a small population of less than 24 million, has managed to gain advantages in the semiconductor and electronics supply chains. Taiwanese people call TSMC the "sacred mountain" that protects the country - an analogy to the mountain range running the length of the island. And some argue that China would not attack Taiwan recklessly because of TSMC's importance in the global supply chain. The argument may not stand but it does indicate there have been changes in TSMC's role in the wake of geopolitics in the US-China standoff.

TSMC's revenue came to US$45.5 billion in 2020, the highest in the company's history. Its market cap topped US$560 billion in June, 2021, also front-running in the world. Apart from process technology, customer base and industry ecosystem, geopolitics is also a key factor affecting Taiwan's semiconductor industry development going forward.

The Biden administration has identified semiconductor as a critical part of the supply chain. TSMC has responded by announcing its intention to take part in the US government's efforts to revive the country's domestic semiconductor manufacturing industry. Japan and Germany are also said to be wooing TSMC to set up plants with enticing incentives. TSMC's strong position allows it to tap the world's best resources. From a positive perspective, TSMC can leverage these opportunities to keep upgrading itself and diversify its developments.

It's obvious that TSMC has established leadership thanks to its tremendous investment, advanced process technology, continuing R&D commitment and excellent customer relation. What may not be so obvious is TSMC's long-term effort into talent incubation in Taiwan and its corporate management. According to friends of mine who have close connections to TSMC, Taiwan boasts of excellent work efficiency but it does not necessarily translate into advantage when operating on the soil of others. And this is unlikely to change in the next five to 10 years. Looking at it from a different angle, Taiwan must come up with plans to develop the next-generation core industry. Although TSMC brings wealth, glory and opportunities to Taiwan, no industry will prosper forever and no enterprise can stay undefeated indefinitely. What's more important is that experiences get passed down from generation to generation and eggs should not all put in one basket. We are happy that TSMC can become the "sacred mountain" that protects Taiwan and we also hope other companies including UMC, Winbond and Macronix can rise to the occasion and form a group of sacred mountains to protect Taiwan.

Those who are not working in the semiconductor sector or for a supplier in TSMC's industry ecosystem might question the relevance of a TSMC study to their work. But TSMC serves as a good case study for us to take a deep look into the bigger issues. Taiwan has very few companies with a global presence that are worthy of being a textbook example.

Politicians and bankers need to learn how to talk to people in the high-tech sector. Those who are already or may be interested in working in the high-tech sector can establish a secure footing by getting a grasp of the characteristics of this business. Taiwanese people get great satisfaction from talking about TSMC's success. However, it is also imperative that Taiwan strategize for sustainable development into the future and diversify risks while sharing resources with the rest of the world.

The industry is advancing by leaps and bounds. TSMC has plans to recruit 9,000 new employees this year but only about 6,000 students will graduate from local top engineering schools including NTU, NTHU and NCTU. Taiwan's semiconductor sector led by TSMC provides great career opportunities for overseas Chinese and engineers from abroad.

(Editor's note: This is the last part of a series of analysis by DIGITIMES Asia president Colley Hwang about TSMC's competitiveness and the foundry sector.)

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.