When market growth becomes stagnant, find a new industry. At least that's what Taiwan Semiconductor Manufacturing Ltd. (TSMC) did. The world's largest custom chip maker, with revenues of US$10 billion, veered away from its traditional business in December to enter the solar technology sector by acquiring 20% of Motech Industries Inc. for US$193 million.
The company also has plans to enter the LED lighting market. TSMC's board of directors has approved US$46 million to set up an LED production line and product development lab, according to Rick Tsai, the company's president of New Businesses. So why the move into uncharted territories?
"We have observed that the semiconductor market is maturing," Tsai said in an e-mail interview with IndustryWeek. "Since 2000, the compound annual growth rate of the semiconductor market has declined to single digits. While we still expect our sector, dedicated chip foundry, to continue to outperform the overall semiconductor industry, we believe that we can bring more value to shareholders by finding new ways to drive growth beyond the next decade."
Taiwan Semiconductor's expertise is in wafer fabrication, as shown above, but the company will use its experience in the field to enter the solar and LED lighting markets.
Moving forward, TSMC will use its partnership with Motech to gain a better understanding of its new industry, Tsai says. "Our task right now is to find the entry points in the value chain, define the right business models and formulate the business strategies. While we are not completely done with these, they are certainly taking shape quickly."