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TSMC Founder Morris Chang

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January 27, 2025

TLDR: In a rare English interview, TSMC Founder Morris Chang shares untold stories about TSMC's relationship with Apple and NVIDIA, and offers lessons learned from these experiences.

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In a rare English interview with Morris Chang, the founder of Taiwan Semiconductor Manufacturing Company (TSMC), the episode delves into the pivotal moments of TSMC's history and its evolution within the semiconductor industry. Here’s a comprehensive summary of the key points discussed in the podcast.

Introduction to TSMC

  • The Origins: TSMC was established in 1987 as a dedicated pure-play foundry focusing on manufacturing chips for other companies, rather than competing by designing its own chips.
  • Initial Challenges: Early business relied heavily on excess capacity from Integrated Device Manufacturers (IDMs) like Intel, offering a limited scope. However, this positioning laid the groundwork for future growth as the fabulous semiconductor model emerged.

Key Relationships and Partnerships

NVIDIA

  • Formation of a Key Partnership: Chang recounts his relationship with Jensen Huang, the CEO of NVIDIA. In 1997, Huang reached out to explore a partnership, helping transform NVIDIA from a struggling brand into a major customer for TSMC, especially during pivotal product launches.
  • Navigating Challenges: In 2009, Chang faced a crisis when manufacturing issues threatened to strain the partnership. His decisive actions, including direct communication with Huang, led to a settlement of over $100 million, reinforcing the collaborative relationship.

Apple

  • Landing a Giant: The episode highlights how TSMC secured Apple as a major customer. Through a dinner meeting arranged by Chang's wife and Terry Gou, CEO of Foxconn, Chang was able to pitch to Apple's COO, Jeff Williams, leading to the development of chips for popular devices like the iPhone.
  • Overcoming Technical Hurdles: Apple initially sought 20nm process technology, even though TSMC was fully invested in 28nm. Chang had to weigh the risks of diverting resources against the opportunity of becoming Apple's go-to supplier.

Adaptation to Market Dynamics

  • Learning Curve Theory: TSMC's strategy has been influenced by the learning curve principle, focusing on driving down costs through volume production. This helped TSMC to offer competitive pricing while enhancing manufacturing capabilities over time.
  • Technology and Capacity Investment: Morris Chang emphasizes the need for continuous R&D and capital expenditure to stay competitive. TSMC's investment into advancing nodes has positioned it as the leader in the foundry market as technologies evolve and become more complex.

Challenges and Resilience

  • Intel Rivalry: The shifting dynamics in the semiconductor industry required TSMC to navigate issues of competition and partnerships with firms like Intel, which has historically dominated the x86 architecture. TSMC's focus on pure-play manufacturing allows it to serve its customers without competition.
  • Economic Pressures: Chang faced numerous economic challenges, such as financial downturns and pressures from shareholders, leading to tough decisions about CapEx and R&D investments. His experiences highlight the resilience and adaptability required in the fast-paced technology sector.

The Future of TSMC and Semiconductors

  • The Path Ahead: Looking forward, Chang discusses the potential for growth in technology demand, especially with the rise of AI and other emerging technologies. As the world increasingly relies on computing power, TSMC stands to benefit from its foundational role in enabling these advancements.
  • Market Monopoly and Innovation: The podcast concludes with reflections on the structural advantages TSMC holds, being one of the few dedicated foundry companies capable of managing the extraordinary costs associated with semiconductor manufacturing.

Conclusion

The insights from Morris Chang provide a fascinating glimpse into the strategic decisions and visionary leadership that have made TSMC the powerhouse it is today. His narrative underscores the vital intersections of technology, partnership, and adaptability in the ever-evolving semiconductor industry. With the groundwork laid by TSMC, the future of technology seems poised for continued innovation and disruption.

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