Morris Chang, the visionary founder of TSMC, shares his remarkable journey in the semiconductor industry. He recounts pivotal moments, like winning Apple's chip business and a critical 2009 dispute with NVIDIA. Chang emphasizes the importance of relationships in navigating business challenges and the strategic shifts TSMC made to meet technological demands. His insights into the rise of TSMC as a leading foundry and the broader semiconductor ecosystem are both enlightening and entertaining, making for a compelling conversation!
Morris Chang's journey illustrates TSMC's rise as a pivotal player in the semiconductor industry through strategic partnerships and innovations.
The pure-play foundry model TSMC employs allows it to maintain strong relationships with customers while avoiding conflicts of interest within the industry.
TSMC's commitment to R&D, investing around 8% of revenue, has been integral in driving innovation and maintaining a competitive edge.
Geopolitical influences are leading TSMC to diversify its manufacturing locations, illustrating the complexity of global semiconductor supply chains.
Deep dives
The Journey to Interview Dr. Morris Chang
The hosts share their fascination with semiconductors, ignited by their initial discussions around companies like TSMC, NVIDIA, and ARM over the years. They recount their excitement when they reached out to Dr. Morris Chang, TSMC's founder, for an interview, facilitated by Jensen Huang of NVIDIA. Traveling to Taiwan to meet Dr. Chang was a pivotal moment, showcasing the deep connections that exist within the semiconductor industry. The opportunity to record in Dr. Chang’s office and to visit TSMC's headquarters added an extra layer of excitement to their discussions.
The Importance of TSMC in the Semiconductor Ecosystem
TSMC has emerged as a dominant player in the semiconductor sector, becoming crucial for companies worldwide needing chip manufacturing. The hosts emphasize that TSMC's model as a pure-play foundry means it doesn’t compete with its customers, allowing for a unique position in the industry. They note that TSMC's success stems from its ability to serve both large and small fabless companies, providing state-of-the-art manufacturing without the conflicts inherent in vertically integrated competitors. This aspect has solidified TSMC’s reputation and reliability, making it pivotal to the tech ecosystem.
Dr. Chang's Insights on NVIDIA's Rise
Dr. Chang shares how TSMC began its partnership with NVIDIA, starting from Jensen Huang’s initial outreach in 1997, showcasing a moment of serendipity that benefited both companies. He recounts a letter from NVIDIA's founder expressing eagerness to work with TSMC, which was then a much larger company. Their collaboration successfully helped NVIDIA overcome a financial crisis through TSMC’s foundry services, launching NVIDIA into becoming a leading graphics chip manufacturer. Chang reflects on how such partnerships were foundational not just for TSMC's growth, but also for the expansion of the fabless semiconductor model.
Handling Challenges and Customer Relationships
The discussion delves into challenges faced by TSMC, particularly regarding product yields and customer satisfaction. In instances like the 40 nanometer node production issues, Chang emphasizes the importance of transparent communication and accountability in retaining key clients like NVIDIA. He shares an anecdote of his direct conversation with Jensen Huang after taking back the CEO position, where they resolved a significant quality issue. This candid communication ultimately strengthened their relationship and became a hallmark of TSMC’s customer-first philosophy.
The Strategic Pivot to Leading Edge Technology
Dr. Chang discusses the strategic decision-making process behind TSMC's aggressive investment into advanced technology nodes, particularly the switch to 28 nanometers. He reveals how setting a consistent R&D expenditure percentage was crucial for fostering innovation and remaining competitive. As the market evolved, TSMC decided to embrace the opportunity presented by the smartphone era to position itself at the forefront of semiconductor technology. This foresight propelled TSMC to become a leader in foundry services, balancing immediate manufacturing contracts with future technological advancements.
The Role of R&D in Semiconductor Manufacturing
R&D plays an integral role in TSMC's strategy, as highlighted by Chang's commitment to invest approximately 8% of revenue into R&D budgets consistently. This emphasis on innovation not only drives technological advancements but also enhances product quality and efficiency. The discussions also underscore the connection between R&D, capital expenditure, and production scale, emphasizing the delicate balance TSMC maintains to further its technological leadership. The hosts reflect on how this investment has been key in maintaining TSMC's competitive edge and meeting the ever-increasing demand for semiconductor products.
The Future of Semiconductor Manufacturing
The conversation touches on the potential future of semiconductor manufacturing, especially in the context of geographical diversification stemming from geopolitical influences. TSMC's expansion into Arizona and other locations reflects an adaptation to such pressures while maintaining its core operations in Taiwan. The hosts reflect on how the unique capabilities developed in Taiwan might be challenging to replicate elsewhere due to the established ecosystem. This ongoing evolution underscores TSMC's position as a linchpin in global tech infrastructure while navigating complex political landscapes.
We flew to Taiwan to interview TSMC Founder Morris Chang in a rare English interview. In fact, the last long-form video interview we could find was 17 years ago at the Computer History Museum… conducted by the one-and-only Jensen Huang! This episode came about after asking ourselves a version of the Jeff Bezos “regret minimization” question: what conversations would we most regret not having if the chance passed Acquired by? Dr. Chang was number one on our list, and thanks to a little help from Jensen himself, we’re so happy to make it happen.
Dr. Chang shares the stories of a few crucial moments from TSMC’s history which have only been written about in his (currently Chinese-only) memoirs, including how TSMC won Apple’s iPhone and Mac chip business and a 2009 discrepancy with NVIDIA that almost jeopardized their relationship, and the lessons he took from them. We can’t think of a better way to kick off 2025. Please enjoy!
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Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
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