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EDITORIAL: Investing
in the future, today
Taiwan Semiconductor Manufacturing Co (TSMC) chairman and chief executive Morris
Chang (±i©¾¿Ñ) appeared surprisingly confident when discussing his business outlook
during an investor conference last week, in stark contrast to his demeanor just
three months ago. There was an atmosphere that has been noticeably absent from
recent investor conferences by local electronics companies, as the European debt
crisis and wobbling US economy have cut demand for components used in electronic
devices.
Why was Chang so confident?
¡§There is a line for 28-nanometer [chips],¡¨ he said.
In other words, customers have started lining up for TSMC chips. That in turn is
an indication that the company¡¦s policy of investing in next-generation
technologies in upcycles and downcycles is paying off.
As the world¡¦s top contract chipmaker, TSMC is the first firm to mass produce
28nm chips for clients such as handset chipmaker Qualcomm Inc. Its competitors
United Microelectronics Corp (UMC) and Abu Dhabi-backed GlobalFoundries are not
scheduled to start commercial production until the second half of next year.
TSMC budgeted a record US$7.3 billion spending this year on new equipment needed
to produce chips for sleek mobile devices that demand less power consumption and
higher performance, after previously cutting expenditure twice because of the
weak global economy, sluggish demand and excessive inventories.
Although the semiconductor industry as a whole is expecting an almost flat year,
with perhaps a 1 percent annual increase in revenues, TSMC will outgrow its
peers with a projected increase in revenue of 9 percent year-on-year excluding
foreign exchange fluctuations, Chang said.
In addition, the company¡¦s growth will not be achieved by forcing workers to
take unpaid leave or handing out pink slips. Chang promised TSMC would not cut
work hours or its workforce, saying that employees were the firm¡¦s most valuable
asset.
Hon Hai Technology Group chairman Terry Gou (³¢¥x»Ê) may not subscribe to TSMC¡¦s
labor policy, but he would certainly accept the chipmaker¡¦s strategy of
investing in the future.
¡§We have to invest, in the downturn, in particular, to enhance company
fundamentals,¡¨ Gou said when pressed by reporters on Saturday asking what
corporate managers could do to help their companies ride out of the slump, other
than send their employees on vacation.
Earlier in the day, Hon Hai group, which operates the world¡¦s biggest
electronics contract maker, Hon Hai Precision Industry Co, unveiled its latest
investment plan, which involves investing NT$12 billion (US$400 million) in the
production of robots and automated systems in central Taiwan over the next three
to five years. That closely follows a US$12 billion investment in Brazil to make
laptops and tablet computers.
For Hon Hai, the investments in robots and automation are part of the group¡¦s
efforts to boost automated manufacturing as a way of coping with rising labor
costs that have eroded its gross margins. For example, Hon Hai Precision saw its
gross margin fall from 8.35 percent last year to 7.26 percent in the first half
of this year.
Of course, only industrial leaders like TSMC and Hon Hai are able to splurge on
plant expansion. It is not something every company can do. However, TSMC and Hon
Hai were unknown companies two decades ago and in that context, it is worth
recognizing that carefully planned investment in new technologies is a winning
strategy for any company seeking long-term prominence.
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