A successful model that maximises customer value

TSMC continues to grow aggressively in the semiconductor industry.
The key to TSMC’s success is its foundry business model, which focuses solely on production functions.

According to the company website, ‘By not designing, manufacturing or selling any products under the TSMC brand, we have eliminated competition with our customers (clients) and have focused on customers (clients) success’.
Behind the growth of foundry companies such as TSMC is the existence of fabless companies, which are the customers of these foundries. The production system has been adopted whereby the client handles product planning, design, marketing and sales, while the production of the product is outsourced to foundry companies. Manufacturers such as Apple fall into this category.

Source: Taiwan Semiconductor Manufacturing Co., Ltd.

Optimising business models with OEM, ODM and OBM

Outsourced manufacturing includes ODM, OBM and OEM, which can be divided into the following types depending on how the outsourcing of manufacturing operations is set up.

  1. original brand manufacturer (OBM)
    The brand owner handles all aspects of design, design, engineering, manufacturing and marketing, with limited outsourcing.
  2. original design manufacturer (ODM)
    The brand owner concentrates solely on marketing and sales activities and outsources design and manufacturing to specialist engineers.
  3. original equipment manufacturer (OEM)
    A type of outsourcing where the brand owner provides design, design, product specifications and other production details to the manufacturer.
Smiling Curve Analysis: manufacturing and assembly in the middle of the value chain have the least value-added, while research and development and sales and after-sales at both ends have the greatest value added.

However, due to force majeure risks such as lockdowns and activity restrictions that emerged in the Corona disaster, foreign exchange risks due to the weak yen, price risks due to soaring overseas labour costs and inflation, etc., it has become necessary to develop overseas production sites and overseas bases in response to BCP. Moves to develop overseas production bases, return overseas bases to Japan, or invest in Japan by foreign companies such as TSMC are gaining momentum.

Under these circumstances, when conceiving new projects, the way OEM, ODM and OBM should be reviewed and business concepts that can maximise customer value become the foundation of sustainable business development.

Maximising the business value

We can provide strategic technical support for establishing international supply and value chains in Japan and overseas. We are committed to maximising the business value of brand owners by providing design, design development, product specification and construction management at the OEM, ODM and OBM levels of ‘Manufacturing’.

Recommended Articles