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May 11, 2009 1:16 am
The world’s biggest contract chipmaker, Taiwan Semiconductor Manufacturing Company, is considering diversifying away from chips for the first time in its 22-year history to combat declining industry margins.
“If you look at the past five to 10 years, growth [in the industry] has slowed down,” Rick Tsai, chief executive, told the Financial Times. “It is very logical and natural for a company of our size to look for opportunities for extra growth.”
TSMC, which accounts for about 10 per cent of global semiconductor output, last week appointed Chao Ying-cheng, president of TSMC China, to head a new business unit that will look at possibilities in green energy, such as solar panels.
“In the long term, the world needs to be a greener place,” Mr Tsai said, but added that no decision had been made. “We’re looking at these things from a very long-term point of view. It’s not just try to get in and make a quick profit.”
The Taiwanese chip group suffered its biggest drop in revenue in the first three months of this year, barely breaking even in the first quarter, as a result of the global economic crisis.
Mr Tsai said at the time that business was picking up again. “It is pretty obvious now that we were at the bottom [of the market] at around December or January,” he said.
TSMC is playing a growing role in the chip industry as semiconductor companies that previously made their own chips outsource production to TSMC, either to tap its expansive client network or because of worsening business conditions.
Intel, the world’s biggest chipmaker, in March turned to TSMC for help in making its Atom microprocessors, the first time the US company has outsourced production of microprocessors.
Fujitsu, the Japanese electronics group, last month said TSMC would make some of its chips and that the two companies would collaborate.
Mr Tsai said the world was experiencing an unprecedented proliferation in computing power with the advent of devices such as smartphones and netbooks that blur the line between computers and consumer electronics.
“We just don’t know what will come out,” he said. “It’s a new phenomenon.”
Because computing power was more widely available, “if you want to command very high [profit] margins, that will be more difficult,” Mr Tsai said.
“For the whole industry, we do have not enough margin,” he said. “Our industry has been lowering our price continuously ... However, I think the price can go down at a more reasonable rate.”
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