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Analysis: What's behind TSMC's LED venture?

Posted: 23 Apr 2010 ?? ?Print Version ?Bookmark and Share

Keywords:TSMC LED move? LED? foundry? wafer fab?

Taiwan Semiconductor Manufacturing Co. Ltd's foray to the LED market leaves some to wonder if the foundry giant is just looking for new markets. Or, perhaps TSMC is making a huge strategic shift by taking a step as an IDM.

At its technology event last week, TSMC Hsinchu) disclosed more details about its bold!and possible controversial!strategy in LEDs. In March, TSMC held a groundbreaking ceremony for an R&D center and wafer fab to develop and make LEDs for lighting applications.

The move marked a major change at TSMC, which has until this point been focused on the foundry supply of integrated circuits.

Surprisingly, TSMC will not provide foundry services for LED makers. Instead, the company will develop and sell LEDs under the "TSMC brand," according to a TSMC spokesman, who did not elaborate or provide a timetable for the product introductions. TSMC will not compete against its customers, as some may fear, the spokesman insisted.

Still, the move into LEDs represents the first time that TSMC has developed and sold products under its own brand name!which could upset some customers. The company will not only make LEDs, but for the first time, it must develop a product strategy and channel. And it begs a question: What's stopping TSMC from entering other product areas with its own brand name?

Most believe TSMC will remain a foundry in the IC sector, but not in LEDs. There is little or no business model in the LED foundry sector. Most LED vendors have their own fabs and the startup costs are minor compared to the IC industry. The real value-added in LEDs is technology and the channels.

TSMC is running into the LED!as well as solar!markets for good reasons: It is looking for new engines of growth. For some time, Morris Chang, chairman and CEO of TSMC, has said the IC market is slowing and the company must look for new markets.

In total, total LED consumption hit 63 billion units in 2009, up from 57 billion in 2008, according to iSuppli Corp. LEDs could be in short supply this year amid huge demand for TVs, lighting and other applications, according to the firm.

"TSMC has been making noise for some time that they are looking to diversify but to do so smartly by leveraging their semiconductor expertise. Both LED and solar have been mentioned," said Dean Freeman, an analyst with Gartner Inc.

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