Issue #38

When the Ecosystem Becomes Part of the Product

How TSMC made advanced chip manufacturing easier to use by coordinating the companies around it.

In 2008, Taiwan Semiconductor Manufacturing Company (TSMC) introduced something that had little to do with building another semiconductor factory.

It called it the Open Innovation Platform.

TSMC manufactured chips for other companies. Its customers designed semiconductors, and TSMC provided the technology and facilities needed to produce them. But as chip manufacturing became more advanced, customers faced a problem that better factories alone could not solve.

They also needed compatible design software, reusable chip components, accurate technical information and specialist engineering support. These capabilities often came from different businesses, and they had to work together.

A company could have access to advanced manufacturing technology and still struggle to prepare a chip design for production.

TSMC's response was to coordinate more of the businesses surrounding its manufacturing processes. The objective was to make it easier for customers to design chips that could actually be manufactured.

This was not about replacing the company's core offering. It was about recognizing that customers depended on several other capabilities before they could fully benefit from it.

The Factory Was Only One Part of the Process

Before a semiconductor reaches a factory, engineers must design and test how its electronic components will work together. They use specialized software, technical libraries and reusable design components. The completed design must then meet the requirements of the manufacturing process.

If these elements are incompatible, the customer may face additional engineering work, delays and costs.

This makes semiconductor manufacturing different from buying a finished product. A business purchasing ordinary equipment can evaluate its specifications, reliability and price. A chip designer must also consider whether the software and technical resources needed to develop its own product will work with the manufacturer's technology.

TSMC had collaborated with design-tool companies, intellectual-property providers and engineering specialists before 2008. These relationships were not new. What changed was the decision to organize them more deliberately.

The Open Innovation Platform brought together several kinds of businesses, including electronic design automation companies, intellectual-property providers, design centres and other specialists involved in bringing chips into production.

Electronic design automation, or EDA, refers to the software engineers use to design and verify chips. Intellectual property, or IP, refers here to reusable semiconductor design components.

Both mattered because chip designers did not necessarily create everything from the beginning. They could use existing components and specialized software, provided these worked with the intended manufacturing process.

In June 2008, TSMC announced a unified design-for-manufacturing architecture developed with design-tool vendors and infrastructure partners. The initiative aimed to improve the connection between design and manufacturing by making technical information more consistent across different tools.

By 2010, TSMC reported participation from 30 EDA partners, 38 IP partners, 23 design-centre partners and nine value-chain aggregator partners.

These were not simply distributors selling the same product. They were independent businesses contributing different capabilities that customers needed.

The distinction matters. TSMC was not trying to manufacture every component of the customer's design process. It was helping make those components work together.

When Other Companies Become Part of the Offering

There is an established strategic concept behind this arrangement: a business ecosystem.

A business ecosystem consists of organizations whose contributions must align to deliver a broader value proposition. The companies may remain independent and sell different products, but customers depend on their capabilities working together.

Another relevant concept is complementary assets. These are resources or capabilities that make a core technology more useful.

For TSMC, manufacturing technology remained fundamental. But compatible design tools, verified components and specialist expertise helped customers use that technology.

The company did not need to own every software developer or IP provider. It could coordinate independent businesses around common technical requirements.

This changed the practical meaning of its offering.

A customer considering TSMC was not evaluating manufacturing specifications alone. It also needed to know whether its engineers could access the tools, design components and technical support required to use that manufacturing process.

The surrounding ecosystem therefore became relevant to the customer's ability to adopt the technology.

That is where the case becomes interesting for B2B marketing.

A supplier can explain its product's performance, features and technical advantages in considerable detail. But customers may still hesitate if the systems and services needed to use that product are difficult to access or poorly coordinated.

Consider enterprise software that requires integrations with existing systems, or industrial equipment that depends on compatible control technology. In both cases, the core product may be strong while the surrounding requirements complicate adoption.

These are broader business parallels, not evidence that the same outcomes occurred in those industries.

The underlying question is whether the customer can obtain the promised value without relying on other companies.

For marketing leaders, this changes what needs to be understood about the value proposition. The offering may be judged partly on capabilities the supplier does not directly own.

However, simply having many partners is not enough. A partner directory does not guarantee compatibility, and an extensive network does not automatically improve customer outcomes.

The important issue is whether the relationships help customers accomplish something they would otherwise find more difficult.

TSMC's platform was organized around that practical requirement: connecting semiconductor design capabilities with the manufacturing technologies customers intended to use.

The Evidence Was in How Customers Used the System

By 2012, TSMC's annual report provided evidence that its supporting design infrastructure was being used.

The company reported more than 100,000 downloads of technical files and process design kits during the year, compared with 50,000 in 2011. These resources helped engineers design chips compatible with TSMC's manufacturing processes.

The report also stated that more than 60% of new tape-outs at TSMC in 2012 used one or more libraries or IP components from TSMC or its partners.

A tape-out is the stage at which a completed chip design is submitted for manufacturing.

The two figures show different things. Downloads indicate demand for technical resources, while the tape-out figure demonstrates the use of supporting design components in customer projects.

Neither proves that the Open Innovation Platform independently caused faster development, higher revenue or improved customer retention.

But they show that customers were using manufacturing technology alongside an extensive collection of supporting resources.

In 2012, TSMC also announced a complete design ecosystem for its 20-nanometre manufacturing process. It included design kits, verified components and reference workflows developed with partners.

For customers adopting a new manufacturing process, the availability of compatible design infrastructure mattered. Advanced manufacturing technology was more practical to use when the necessary tools and components were ready alongside it.

The ecosystem continued developing.

In a 2023 retrospective marking 15 years of OIP, TSMC reported more than 110 partners across six alliance programs and a portfolio exceeding 70,000 IP items.

Those figures describe the ecosystem's later scale. They do not mean all those partners were present at launch, nor do they establish that OIP alone explains TSMC's wider commercial success.

What the documented progression does show is that coordinating complementary capabilities became an ongoing part of how TSMC supported its manufacturing technologies.

When the Value Proposition Extends Beyond the Company

The TSMC case raises an important question about how B2B companies define what they sell.

For a semiconductor foundry, the description could end with manufacturing capability, process technology and production performance. Those remain essential. But customers also need compatible software, technical resources and specialist support to bring their designs into production.

The value proposition therefore extends into a network of capabilities that the foundry does not entirely control.

That does not mean every B2B business should build a formal ecosystem. Coordinating independent companies requires resources, technical discipline and ongoing cooperation. Partners have their own priorities, and customers may still encounter difficulties.

The more useful lesson is to understand which external capabilities are necessary for customers to obtain value from the core offering.

If those capabilities are unavailable, incompatible or difficult to coordinate, they can become obstacles even when the supplier's product performs well.

There is also a difference between promoting partnerships and making partnerships useful.

A list of technology partners may strengthen a company's presentation. Compatible tools, verified components and accessible technical resources can make a practical difference to the customer's work.

TSMC's Open Innovation Platform was designed around the second challenge.

The company remained a semiconductor manufacturer. Its manufacturing technology remained central to its business. But it recognized that customers needed more than access to advanced factories. They needed the surrounding design infrastructure to work.

For senior marketing leaders, this is a different way to examine customer value. The question is not simply how well the company communicates its own capabilities. It is whether customers can confidently use those capabilities within the wider systems on which they depend.

How much of your customer's ability to use what you sell depends on other companies getting their part right?