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From 80/20 rule to 90/10

Colley Hwang, DIGITIMES Asia, Taipei 0

In the post-industrial era, globalization and efficient management have given everyone a deep understanding of the 80/20 rule. Each of us understands that 80% of the added value may come from the contribution of 20% of the elite.

However, with the maturity of systemized operation, machine learning and other applications based on big data and artificial intelligence (AI), we see that the added value of industry or society is developing in the direction towards 90/10. It is expected that 10% of the elite will contribute 90% of the added value, or 10% of the elite will establish the value of national survival or the barriers that are difficult to be overcome by other countries.

The CEO's responsibility lies in defining the market value and business model. It is far easier for an outstanding CEO to enhance the added value by 1% than the benefits brought by 1,000 engineers, according to TSMC founder Morris Chang. In this new era, the added value of a company can be generated from business positioning, system integration, and even structural deployments of capital expenditure.

If we estimate the value added of TSMC and MediaTek at 65%, about 6% of Taiwan's GDP comes from the contribution of these two companies, and their contribution is about half of the value added of the entire semiconductor industry, or roughly three times the value of the agricultural county of Yilan in northeastern Taiwan. If we can't hold on to the semiconductor sector, we can't hold on to Taiwan, according to a local finance analyst.

TSMC's success is a result of the serendipity of the times and the wisdom of its managers, but we've often failed to learn from its success. We tend to ignore what made TSMC's pure-play foundry business model a success, or fixate our attention on its stock price. As someone who has studied TSMC's business model for many years and has had many interactions with its senior management, I will not just sing TSMC's praises, but hope to learn from its success story for the sake of our own business.

In our multi-track development, cross-domain, cross-border, and cross-generational business experience, we find that there are more and more things to do, but fewer and fewer people to do them. At the same time, we are facing an aging population, low birth rates, and misplaced human resources. In this new era, whoever can diversify and move away from linear thinking to a matrix development model, or whoever can access key resources, will have a structural advantage and hold a competitive position in the long run.

From this trend, we can see that people or countries that have already occupied the strategic high ground will have form barriers that are difficult for others to overcome.

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.