Foundry Giant Sees the Light

What does TSMC know about solar cells and LEDs? More than you'd expect


Photo: Sam Yeh/AFP/Getty Images

TSAI TIME:

TSMC must break into LEDs and solar to grow faster.

What do you do when you dominate your market? You find other markets to dominate. That's the plan for Taiwan Semiconductor Manufacturing Co. (TSMC), the world's biggest semiconductor foundry, according to its founding chairman, who retook the reins of the company in mid-June. Morris Chang, the recently reappointed chairman and CEO, says that a better future lies ahead for the firm if it pushes into green energy--specifically solar power and LEDs.

The immediate question from watchers of both industries is: What does a silicon foundry know about solar cells and LEDs? Light-emitting diodes aren't even a silicon technology, as they rely on gallium arsenide and other compound semiconductors. With a 2008 net income of NT $99.93 billion (about US $3 billion), TSMC can surely afford to buy expertise. "We will pursue smart brains from outside TSMC and adopt a merger-and-acquisition strategy," Chang says.

But a close look at TSMC shows that the company already has some of the technological foundations for work in both areas. According to a 2008 report by tech consulting firm Semiconductor Insights analyzing U.S. patents in solar technology, TSMC is the second largest patent holder in solar cells. Granted, most of those patents are primarily concerned with TSMC's existing business, with solar cells mentioned as a secondary use often in boilerplate language in the patent claims. But some, such as a 2006 patent application for a method of patterning indium-tin-oxide films--used as the transparent electrode in solar cells, among other things--are more directly relevant.

In the LED arena, TSMC has indirectly invested in a number of start-ups, including LED-lighting maker BridgeLux, LED-driver firms Auramicro and Exclara, and LED thermal-management company Liquidleds. The investments were made through VentureTech Alliance, a venture capital company owned mostly by TSMC and run by several former TSMC executives.

Closer to home, local media reports reveal that the company is bringing metal-organic chemical vapor deposition (MOCVD) equipment from old silicon-chip manufacturing plants back online for LED trial production. TSMC has also acquired a 1.2-hectare plot of land in Hsinchu Science Park for its expansion.

The solar and LED businesses will come under a new unit headed by Rick Tsai. Until Chang replaced him in a move that surprised many analysts, Tsai was TSMC's CEO.

The main reason for the green-tech push is to counter the slowing growth of the semiconductor foundry business. According to Chang, without new business operations, TSMC's revenues, which stood at US $10.6 billion for 2008, might grow by 3 percent annually to between $14 billion and $15 billion by 2018. However, Chang hopes solar and LEDs will push growth to 4.5 percent per year and add $2 billion in revenue per year by 2018.

TSMC's move is in step with government initiatives to boost the production value of the local solar photovoltaic industry from NT $101.1 billion in 2008 to NT $450 billion (US $13.6 billion) by 2015 and that of the LED industry from NT $46 billion in 2008 to NT $540 billion (US $16.3 billion) by 2015. The government expects China to be a big consumer of its green-tech wares. In early June, a cross-Strait conference on the LED industry was held in Taipei, and Chinese delegates asked Taiwanese LED makers to participate in a project in China to light up 10 cities with energy-saving LED streetlights.

Some in Taiwan are pleased with TSMC's new direction. Cheng-Chung Lee, a professor of optics and photonics at the National Central University and chairman of Taiwan's 200-member Optical Engineering Society, says there is a gap between the industry and research circles in Taiwan that the TSMC move might help close. He believes that when challenged by a rival such as TSMC, local companies would have no choice but to acquire new technologies developed in universities and research institutes.

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