At the Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco from Nov. 11–17, amidst a gathering of global leaders, one figure stood out, not for his political clout but for his monumental contribution to the tech world: Morris Chang, Taiwan’s delegate and the founder of TSMC (Taiwan Semiconductor Manufacturing Company).
The eminent tech leader was chosen as Taiwan’s special envoy to the annual forum to promote trade, investment, and economic cooperation. It was the seventh time that Mr. Chang had represented Taiwan at APEC.
Mr. Chang, at 92, commanded respect and attention, as many of the international leaders at the summit sought his insights on semiconductor issues, a testament to TSMC’s global dominance and his status as the godfather of Taiwan’s semiconductor industry.
A Dollar Difference That Shaped a Career
Born into a respected family in Ningbo, Zhejiang, China, in July 1931, Morris Chang’s early life was marked by instability. Amidst China’s turmoil, he moved across six cities and changed schools ten times.In 1949, when Mr. Chang was 18, China fell to communism. He found refuge in the United States, enrolling at Harvard University and later MIT, where he earned a master’s degree, despite failing his doctoral exams twice—a setback he later described as the greatest stroke of fortune in his life, as it pushed him into the job market.
In 1955, Mr. Chang stood at a career crossroads, weighing offers from Ford Motor Company and Sylvania Semiconductor, at the time a small division of Sylvania Electric Products. The automobile giant would pay $479 a month, while the less well-known Sylvania offered just a dollar more at $480.
Although he initially leaned toward Ford, Mr. Chang’s request for a salary match was bluntly refused, prompting the young engineer to choose Sylvania—a decision he later attributed to youthful impulsiveness but one that irrevocably linked his fate with semiconductors.
A Journey of Persistent Innovation
Sylvania was a challenging introduction to the cutthroat semiconductor industry, characterized by its relentless pace and unforgiving competition. Mr. Chang’s time there, though challenging due to the division’s continual struggles with profitability, taught a crucial lesson: in this rapidly evolving field, falling behind could mean never catching up.Three years later, in search of a more dynamic environment, Mr. Chang transitioned to Texas Instruments (TI), a decision that marked a significant turn in his career. At TI, the atmosphere was palpably different. The workforce was young, mostly under 40, brimming with energy and ambition.
The culture at TI was one of dedication, where unpaid overtime was the norm, and weariness was seldom acknowledged. Failure was not an option; setbacks were seen as temporary hurdles to be overcome through persistent effort. It was here that Mr. Chang truly absorbed the essence of an American tech company’s vigor.
During his time at TI, Mr. Chang befriended Jack Kilby, a newly employed engineer who was conceptualizing the integration of multiple components into a single silicon chip. Initially skeptical of Kilby’s project, which he dismissed as impractical, Mr. Chang soon witnessed its fruition.
The groundbreaking work, the first integrated circuit, laid the foundation for modern computing, though its significance was initially underestimated. Kilby received a Nobel Prize in Physics in 2000, a few years before his death. The honor underscored the transformative nature of the forward-looking technology, a lesson that profoundly influenced Mr. Chang.
Mr. Chang’s tenure at TI, beginning in 1958 and spanning over two decades, saw his meteoric rise through the ranks. He became vice president by the age of 41, managing over 30,000 employees, and making significant contributions to the Fortune 500 company.
The Inception of TSMC: A Pioneering Venture
While Morris Chang’s leadership at Texas Instruments led to consistent triumphs in the competitive semiconductor sector, a shift in corporate strategy by the late 1970s diverged from his vision.The new CEO shifted the strategic focus to emerging markets like calculators, digital watches, and home computers, which contradicted Mr. Chang’s call for increased investment in semiconductors. The divergence sparked Mr. Chang’s desire for a new venture.
In 1984, his career path led him to General Instrument Corporation, another chip company.
Then, in 1985, he received an invitation from Taiwan to lead its Industrial Technology Research Institute (ITRI) during the nation’s transition to a high-tech economy. Taiwan hoped that the chip expert could help supercharge innovation for the island nation.
This move, initially not aimed at starting a company, soon transformed due to an encounter with Li Kwoh-Ting, a Taiwanese economist and politician known as the “Father of Taiwan’s Economic Miracle.” Li was a key figure in Taiwan’s technological evolution and had been cultivating a friendship with Mr. Chang for years—a “deliberate plot” to eventually recruit him, Mr. Chang would later say.
Just three weeks into Mr. Chang’s role as president of ITRI, Li approached him with the mission of establishing a semiconductor company. It would be due to Li’s backing and encouragement that Mr. Chang founded TSMC, transforming a government-led semiconductor initiative into a commercially viable project.
Turning to Asia
An experience in the early 1980s at TI’s factory in Japan provided Mr. Chang with critical insights. The factory’s yields—functional chip ratios—were twice that of TI’s U.S. factory. Yield is a critical statistic in the industry; a higher ratio means lower production costs and higher profits.Mr. Chang was sent to Japan to investigate. The Japanese factory’s success, Mr. Chang discovered, was largely due to its high-quality, stable workforce, a stark contrast to the U.S. facility. The Japanese factory’s staff was not only high-quality but also had astonishingly low turnover rates.
In Japan, the operators were at least high school graduates, often even university graduates, mostly female, with very low turnover. Japanese supervisors told Mr. Chang that their operators usually only resigned to get married.
However, achieving this in the United States was nearly impossible. In the Texas factory, it was difficult to find high-caliber employees with technical or engineering backgrounds. The turnover rate was as high as 20 to 30 percent during times of booming economy and over 10 percent even in recessions.
Revolutionizing the Business Model
Along with Mr. Chang’s insights into Asian manufacturing, he brought to TSMC an approach that was considered novel in the global semiconductor industry.At the time, the industry followed the IDM (Integrated Device Manufacturer) model. IDM was a design and production approach that took charge of all processes involved in producing semiconductors, from planning to final product to sales. The approach made the semiconductor industry a high-threshold, intellectual, and capital-intensive sector dominated by giants.
Years of professional experience had taught Mr. Chang that semiconductor product design and manufacturing could be separated. As early as the 1970s, he had proposed in TI’s management meetings that only companies mass-producing chips could be cost-effective as technology advanced and transistors shrank.
The “foundry” concept—leaving the design to others and focusing on production—emerged at this point. Although many had proposed the idea, Mr. Chang was the one who finally implemented the idea that microchips could be designed in one place but manufactured elsewhere.
Values Determine the Future
At 56, an age when many contemplate retirement, Mr. Chang embarked on what would become the most illustrious phase of his career, utilizing a lifetime of knowledge and experience to spearhead TSMC’s ascent in the semiconductor industry.From its inception, Mr. Chang aimed to position TSMC as a global player. He recruited world-class managers, with the first three general managers being Americans, to foster a diverse and international workplace. Despite the predominantly Chinese ethnicity of the staff, English was mandated for all internal communication to cultivate a global environment.
A pivotal moment for TSMC was securing certification from Intel, then led by CEO Andrew Grove. Without ISO (International Organization for Standardization) standards at the time, Intel’s endorsement was crucial.
Initially, Intel identified up to 200 defects in TSMC’s products. However, TSMC rapidly improved, reducing defects significantly and aligning with world-class standards. The defects were down to 20 within weeks; soon they had been reduced to four.
This swift improvement not only earned Intel’s certification but also led to substantial orders from the semiconductor giant. In 1988, by contracting for Intel to manufacture lower-end wafer components, TSMC made a name for itself.
Mr. Chang also established a comprehensive set of rules and regulations at TSMC, ensuring clear guidelines and accountability. Beyond world-class leadership and vision, TSMC also possessed a world-class management and operational environment.
However, advanced technology and efficiency alone were not enough. To persuade more chip companies, who are often competitors, to entrust their highly confidential designs to another factory, the most crucial aspect was integrity. Only by gaining customers’ trust could the company continue to grow healthily.
Mr. Chang established “Integrity, Commitment, Innovation, and Customer Trust” as the four core values of TSMC. These foundational values were more than just corporate slogans; they were the bedrock upon which TSMC built its reputation and success.
To alleviate customer concerns about design leaks, TSMC employees were not allowed to bring cameras, mobile phones, watches, hard drives, and other electronic devices into the factory and even had to swipe cards to enter restrooms.
A Legacy Beyond Business
With a competitive attitude that became legendary, TSMC secured more and more international orders and reaped rich rewards. It has not only become the most profitable company in Taiwan but has also grown into an international semiconductor giant, with a market capitalization of about $500 billion and the world’s highest global market share.Through TSMC, Mr. Chang helped birth the semiconductor industry in Taiwan, said Taiwanese President Tsai Ing-wen in a speech honoring Mr. Chang in 2018. He enhanced the global visibility of Taiwan via TSMC’s passion for innovation and technical capacity building, Ms. Tsai said.
TSMC’s journey, initially met with skepticism due to Mr. Chang’s unconventional foundry model, has reshaped the semiconductor industry. The model not only fostered TSMC’s growth but also enabled the emergence of independent chip design companies, transforming the industry landscape. Harvard Business School Professor Michael Porter observed that TSMC not only created its own industry but also catalyzed the creation of an industry for its customers.
Beyond the business model, the tech legend believes that three elements are essential for a company’s success—values, vision, and strategy. He said, “If we were to rank these, values are the most important; they determine the future of a company.”
