'Customer-Centric' TSMC: "Engineers Are at the Core of Decision-Making"

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"TSMC operates its manufacturing business like a service industry. The company can only succeed if its customers succeed."

Lin Hongyuan, author of the bestseller "TSMC, The Secret of the World's No.1," and advisor to Taiwan Business Today, made this statement during a seminar hosted by the Korea Corporate Governance Forum at the FKI Tower in Yeouido, Seoul, on the 19th. The seminar was held under the theme "The Secret of TSMC's Success." As the keynote speaker, Lin, a high-tech journalist, has covered the Taiwanese semiconductor industry for 30 years, including the development of TSMC, the world's leading foundry.

Lin Hongyuan, author of the bestseller "TSMC, The Secret of the World's No.1," advisor to Taiwan Business Today, is giving a lecture at a seminar hosted by the Korea Corporate Governance Forum on the 19th at the FKI Tower in Yeouido, Seoul. Photo by Jang Heejun

Lin emphasized TSMC's unique corporate culture, stating, "TSMC goes beyond simple manufacturing capabilities to provide customized services for its customers." He added, "TSMC is so customer-centric that if it cannot handle the required capacity (CAPA), it will even refer customers to its competitor, Samsung Electronics."

This approach reflects the philosophy of founder and former chairman Morris Chang. Lin explained, "Morris Chang considered whether to produce generic models or focus on customized models as a business strategy." He added, "It is difficult to compete with even a single rival in the generic market, but he concluded that focusing on customer-specific products would give TSMC a competitive edge." As a result, TSMC quickly exited its struggling DRAM business and, even when the foundry (semiconductor contract manufacturing) concept was unfamiliar, concentrated its organizational capabilities in that area. In the first quarter of this year, TSMC held a 67.6% share of the foundry market, compared to Samsung Electronics' 7.7%, resulting in a gap of nearly 60 percentage points.

Lin summarized the success factors behind TSMC's market value, which is approaching $1 trillion, as "3+1": outstanding performance and execution; the diligence and relatively low wages of its employees; global capabilities built through fierce domestic competition; and, as previously mentioned, the early establishment of a business model focused on foundry services.

He particularly highlighted the engineer-driven decision-making structure. Lin explained, "TSMC is an engineer-centered organization, where engineers?not bosses?make the decisions." He added, "This is reflected in the R&D-centric culture, which at one point was so dedicated that it was referred to as the 'Night Work Army.'"

Lin Hongwon, author of the bestseller "TSMC, The Secret of the World's No.1," and advisor to Taiwan Business Today, is giving a lecture at a seminar hosted by the Korea Corporate Governance Forum on the 19th at the FKI Tower in Yeouido, Seoul. Photo by Jang Heejun

Additionally, Lin analyzed the ongoing struggles of Samsung Electronics, which competes with TSMC in the foundry market, and introduced an anecdote about founder Morris Chang's emphasis on 'independence.'

He said, "Morris Chang believed that for a company to succeed, its board of directors must remain independent from management." He continued, "A professional manager would not run a company the way Samsung does." Lin went on to diagnose, "The weak corporate governance under Chairman Lee Jae-yong is dispersing the energy needed to focus on customers and markets amid China's rise and the new artificial intelligence (AI) trend." This can be interpreted as a criticism that the owner-centered management style and the legal risks surrounding Chairman Lee are affecting the company's business and investment decisions.

As for the challenges facing the highly successful TSMC, Lin pointed to global capabilities. He stated, "In the case of Samsung Electronics, more than half of its employees may be overseas hires, but at TSMC, over 90% of employees are Taiwanese." He added, "This workforce composition could present significant obstacles for TSMC's internationalization strategy in the future."