TSMC, or the Taiwanese Semiconductor Manufacturing Company, manufacturers more than 60% of the world’s computer chips. Therefore, naturally It is the most important company in this domain. This post takes a look at how they became the most prominent chip producer.
Origins
TSMC was founded in 1987 by Morris Chang, a businessman and electrical engineer. This was after Li Kwoh-ting, a politician and economist, considered the “Father of Taiwan’s Economic Miracle”, invited Chang to serve as the president of the Industrial Technology Research Institute. The statesman offered Chang a blank cheque to build Taiwan’s chip industry.
Despite what may have looked bleak at the start, given that both Intel and Texas Instruments had turned down investing in TSMC, Phillips had in fact agreed to a joint venture. Phillips, via a $58 million contract, transferred its production technology and licensed intellectual property to TSMC. In turn, Phillips acquired a 27.5% stake in TSMC.
This was followed by the Taiwanese government, who also owns a part of TSMC, providing 48% of TSMC’s startup capital. The government also raised funds from various wealthy Taiwanese business families, promoting the company as a government project.
Subsequent growth and collaborations
TSMC started increasingly collaborating with more and more companies, developing their chip technology. TSMC collaborates with Apple, going back to 2011 when the chip manufacturer was developing A5 and A6 System on Chip. Apple has since continued to outsource their chip manufacturing to TSMC.
TSMC has further collaborated with ARM, a semiconductor design and software company, in 2014. This was a multi-year agreement where TSMC would produce FinFET, a type of field effect transistor, which has the property of a thin vertical fin, rather than being completely planar.
Business operations
TSMC invests a substantial amount into research and development. The results have definitely shown, as they have pioneered chips that were 0.25 micron, then 0.18 micron, eventually only 7 nanometres! Their highly innovative nature has allowed to constantly stay above the curve.
TSMC also maintains strong relations with their various customers, including Apple, Intel and ARM. This allows them flexibility and adaptability. The results certainly show as TSMC is continuously trusted and receives substantial investment and trust.
The vertical integration present allows TSMC a substantial degree of control over the semiconductor supply chain. Through extensive involvement in the different levels of the supply chain, from logistics, procurement, manufacturing, distribution, marketing, etc, TSMC is able to exert influence and remain the strongest contender in the semiconductor manufacturing space.