Jerry Maguire, the fictional sports agent played by Tom Cruise, summed up well the spirit of Taiwan Semiconductor Manufacturing Company’s new Open Innovation Platform initiative.
“Help me . . . help you,” Mr Maguire implored his one remaining client in the 1996 film.
Morris Chang, founder and recently chief executive again of the world’s biggest contract chip maker, has a far larger network of customers than Mr Maguire but found himself preaching the same message this week when he addressed clients at TSMC’s annual technology symposium.
“We don’t want to play a zero-sum game with our clients”, the 77 year-old Mr Chang told them.
This spirit of brotherhood, embodied by the Open Innovation Platform initiative, arose out of concern over a fundamental shift in the semiconductor industry. After years of averaging high growth despite the inevitable boom-bust cycles, the industry is slowing down – profit margins had fallen from 21 per cent in 2004 to 15 per cent last year, according to TSMC, with little hope of rebound this year or the next.
Mr Chang is convinced that this is not just a down cycle exacerbated by the economic downturn – the bigger picture is that chips are selling for cheaper and cheaper even as the investment cost of advancing to the next technological generation is getting bigger. Moore’s Law still marches on from a technology point of view, but the economics of it is starting to break down.
So cost needs to come down, and Mr Chang proposes doing so by sharing R&D efforts with its clients. Hence the Open Innovation Platform, which seemed a page straight out of Google’s playbook for its Open Handset Alliance for smartphones.
Just as Google is providing the Android operating system for free to help phone makers and application designers innovate on other aspects of the smartphone, TSMC will provide its clients with ‘baseline building blocks’ (access to the basic technology needed to start designing the latest generation of chips), package together a standardised set of methodologies and design guidelines, and co-ordinate research and development efforts to minimise duplication and wasted effort.
TSMC even does one better than Google in that they can clearly monetise the benefits – anyone who designed their latest chip using TSMC’s platform, which is optimised for TSMC’s fabs, are unlikely to take the manufacturing order for that chip to a different foundry. All the better too, if clients also allow some of their own R&D breakthroughs to be later incorporated into TSMC’s open platform to benefit everyone else.
It also allows TSMC to muscle in on segments of the chip industry where integrated design manufacturers still rule. For example the $15bn market for power-management chips, which are still highly customised, but which TSMC now hopes to standardise.
It is a brilliant move if TSMC pulls it off – everyone wins by cooperating and TSMC becomes even more entrenched in its top position by offering something no one else in the business can. But as ST Juang, TSMC director of design infrastructure marketing, pointed out, “This effort needs a lot of co-ordination”. Some of that co-ordination will inevitably have to be done between parties with conflicting interests, and the whole enterprise may yet be undone by another of Mr Maguire’s sayings: “Show me the money!”
