💾 Archived View for gmi.noulin.net › mobileNews › 4806.gmi captured on 2021-12-03 at 14:04:38. Gemini links have been rewritten to link to archived content
-=-=-=-=-=-=-
The smartphone boom has been a boon for a pioneer in semiconductors
Jul 27th 2013 | TAIPEI |From the print edition
Still going strong
WHEN he founded Taiwan Semiconductor Manufacturing Company (TSMC) in 1987,
Morris Chang recalls, Nobody thought we were going anywhere. Back then the
rule was that semiconductor companies both designed and made chips. TSMC was
the first pure foundry , making chips for designers with no factories, or
fabs , of their own. The doubts of others suited TSMC nicely. Mr Chang, at 82
still chairman and in his second stint as chief executive, says that meant it
suffered no competition in its first eight years.
These days the idea is more popular. Last year foundries made about half of all
logic chips (the ones that carry out computations, as opposed to memory chips,
a more commoditised market). United Microelectronics Corporation, a slightly
older Taiwanese company, turned itself into a pure-play foundry in 1995.
GlobalFoundries, with factories in America, Germany and Singapore, was set up
in 2009.
Yet the pioneer still dominates. This year, predicts Samuel Wang of Gartner, a
research firm, TSMC s revenues will exceed those of all other foundries
combined. He reckons it has 90% of the world market for advanced 28-nanometre
chips, which are essential to smartphones and tablets. TSMC s sales in the
second quarter, reported on July 18th, were NT$156 billion ($5.2 billion), 21%
more than a year before. Its net income rose by 24%, to NT$52 billion. That
said, growth should slow in the second half of the year, Mr Chang told
analysts, because smartphone-makers have been building up their inventories of
chips ahead of new-product launches and because sales of PCs and some
smartphones have been weaker than expected. Sales could even shrink in the
fourth quarter.
TSMC has thrived on a mixture of serendipity and anticipation. The market
moved in the direction in which we were heading, says Mr Chang. The boom in
mobile computing has meant a bonanza for several long-standing customers, which
range from Qualcomm, an American firm that dominates the market for smartphones
application processors, to MediaTek, a Taiwanese neighbour that has burst
onto the scene more recently. Sales to Chinese designers such as Allwinner,
Rockchip and Spreadtrum, whose chips power inexpensive Android tablets and
phones, have doubled in the past year; these all license low-energy chip
technology from ARM, a British firm that has been a partner of TSMC s since
2004.
The grand alliance of TSMC and the chip designers, as Mr Chang has called it,
has done far better from the shift to mobile devices than Intel, the world s
biggest chipmaker. Intel both designs and makes chips (in industry argot, it is
an integrated device manufacturer, or IDM). Its processor chips are the brains
of most personal computers, but demand for these has been falling. Although
Intel s newest processors are much less thirsty and the firm is determined to
break into the mobile market, it has so far struggled. Its second-quarter
revenues fell by 5% and its net income by 29%.
A combination of fabless designers and a pure foundry works well, Mr Chang
explains, because the designers don t have to worry about the
capital-intensive part of the business any more : the foundry provides the
scale. At the same time, fabless companies, of which he reckons there are about
50 with annual revenues of at least $100m, compete with one another and with
IDMs. This diverse group has in total produced more innovation than any single
IDM Just look at the mobile products, he says.
The battle lines between the alliance and its rivals continue to shift. Intel
has entered the foundry business and recently snaffled a contract with Altera,
an American designer that has been a customer of TSMC s for 20 years. I really
regret that very much, Mr Chang says. I had an investigation into why that
happened.
On another front, TSMC is fighting Samsung. The South Korean company makes
processors not only for itself but also for Apple, even though the two are
deadly rivals in smartphones and tablets. In addition it is the world s biggest
maker of memory chips. Recently the Wall Street Journal reported that TSMC,
after years of effort, had won a contract to make chips for iPhones and iPads a
victory that will have stung Samsung. (The Taiwanese company has not
commented.) Mr Chang says that he takes neither Intel nor Samsung lightly, but
insists: We have one big advantage: we are a pure foundry. We do not compete
with our customers. No matter how hard Intel and Samsung try, he says, they
will not enjoy the same trust.
The big question hanging over TSMC is whether it can find a worthy successor to
its octogenarian boss. It has had one false start already: he stood down as
chief executive in 2005, but took the helm again in 2009. No handover is
planned yet, but last year three men were appointed co-chief operating
officers . Probably at least two of these, or maybe all three, will end up as
joint chief executives. A m nage trois could prove farcical. But perhaps TSMC
s board thinks its founder is too good an act for one man to follow.
From the print edition: Business