Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) yesterday said that growth and innovation are two permanent values for enterprises, but innovation is not the only thing that leads to growth.
Businesses pursue growth of added value, or profits, rather than revenue growth, Chang said at an event in Taipei.
When a company grows its profits, everything becomes easy and even solving problems such as insufficient electrical and water supplies look like easy tasks, Chang said, citing his 50 years of experience as a high-ranking executive at chipmakers Texas Instruments Inc and TSMC.
Innovation, or making valuable changes, is a good approach to create added value, but it is not the only way leading to growth, Chang said, adding that capital investment expansion and creating more jobs can also spur growth.
Business model innovation is actually the most valuable and most well-known, Chang said, citing novel business models introduced by McDonald’s Corp and Starbucks Corp in the 1970s and 1980s respectively that impressed him.
McDonald’s brought fast food to the public, while Starbucks created a cult of coffee drinkers, he said.
Despite higher costs, Starbucks made enormous profits by selling coffee at US$2 per cup, much more than US$0.5 for a bottomless cup at the time, he added.
Other companies — such as Facebook Inc, Google, Amazon.com Inc and Alibaba Group Holding Ltd (阿里巴巴) — have also invested in their own business models, allowing their founders to become billionaires, he said.
TSMC has demonstrated another way of business model innovation, he added.
“We create different groups of customers and offer different service models,” Chang said, adding that TSMC’s clients are other semiconductor companies, instead of computer firms such as International Business Machines Corp or Hewlett-Packard Co.
“We make wafers like other companies do ... [but] we offer custom services. Other [semiconductor] companies make commodity products,” Chang said.
However, innovation only happens in concert with market mechanisms, he said, adding that it does not occur overnight.
The steady supply of electricity and water, as well as environmental impact assessments, are some of the barriers that local manufacturers need to overcome, Chang said.
Such problems should be tackled by the government, he said.
Asked whether the central bank would help local exporters deal with the appreciation of the New Taiwan dollar, Chang said he doubts it.