The Rise and Success of TSMC: A Journey of Innovation and Government Support
Taiwan Semiconductor Manufacturing Company, Limited (TSMC), which was established as a semiconductor contract manufacturing and design company, which is the national pride of Taiwan, was established in 1987 and is now a leader in its field (Wikipedia, n.d). This blog post will focus on the history of TSMC and its founding process in light of a few questions.
History of TSMC
The phones, computers, cars, watches and many more things we use today work thanks to integrated circuits or semiconductor chips. The first semiconductor company in Taiwan, Industrial Technology Research Institute (ITRI) was established in the 70s with the financial support of the Taiwan government.By 1985, the company’s activities lagged behind its competitors. Morris Chang, who studied at universities such as Harvard and Stanford, was commissioned by the Taiwan government and asked to make a plan to establish a new semiconductor company in Taiwan.Examining Taiwan’s weaknesses and strengths, Chang identified that Taiwan had weaknesses in the IC industry at that time, such as research, development, and marketing.In line with his plan, he planned an IC manufacturer produced for customers’ designs. This plan was carried out with a capital of 48% from the state and 52% without government support. This initiative gained capital through promotion in both the international arena and domestic market, and eventually on February 21, 1987, an IC factory was established in Taiwan, namely the Taiwan Semiconductor Manufacturing Company, Ltd. (TSMC). The company started production by renting a 6-inch factory from ITRI and had a capital of approximately US$35 million. This global company with international management and investors is today the world’s largest leading semiconductor manufacturer.
Was it possible to establish such a company without the participation of Morris Chang?
Morris Chang received education from quality schools such as Harvard, Stanford and MIT. He gained experience in the well-established semiconductor industry such as Texas Instruments for about 25 years. Considering all this, it has managed to find an early market place for the production of chips, albeit at a loss, and has managed to scale up and produce at low cost. I believe that at this point, it is very important to be able to capture early market share, and this was achieved by having strong foresight. Morris Chang’s education and experience helped create this foundation. If it weren’t for Chang’s contributions, TSMC might have been established today, but its market share might not have been so large.
Did TSMC benefit from knowledge transfer from the USA in the early years?
In the articles shared, I did not come across that TSCM benefited from the USA by transferring information directly. But in 1976, ITRI-ERSO signed an agreement with the Radio Corporation of America (RCA) in order to develop in semiconductor technology and was sent to RCA to receive training from ITRI-ERSO researchers. As a result, Taiwan started to produce its own 3-inch silicon chip. Moreover, the agreement between ITRI and RCA contributed to the “know-how” transfer. Thus, a strong infrastructure was created. In addition, the success of TSMC, which was founded under the leadership of Morris Chang, was made possible by the fact that Morris Chang studied in the USA for many years and gained experience by working for many years in this field. In this direction, it is inevitable that there will be an exchange of information on semiconductor technology from the USA in the first years of TSMC’s establishment and in the years before TSMC. However, what Morris Chang mentioned in his speech is that some companies like NVIDIA are late to this game and “we helped them actually they wouldn’t even have started if we weren’t around” he states that the companies that saw TSCM’s growth entered the race in this field. Yes, Morris Chang may have paved the way for this sector, but looking back, the USA is the first in this regard. He was also educated in US schools and worked there for years.
What kind of support did they get from the Taiwanese Government and Phillips (company)?
Taiwan had a hard time raising such a large amount of money. The Taiwanese government therefore provided almost 48% of the $220 million and Phillips 7%.The remainder was funded by a dozen investors and $20 million was raised in the money at the time, a large sum. Morris Chang mentioned in the video that he had a hard time convincing Philips to invest, but they eventually made a small investment to test the waters and evaluate his success. Afterwards, Morris tried to gather more capital with the help of the government convincing other investors, stating that one of them was the prime minister and three ministers who worked with him.The government’s support was undeniably great. We can talk about grants, incentives and tax relief. In addition, it has created related academic institutions, projects and industry infrastructures — science parks — in order to develop in this industry. The government’s reasonable policies and investments made it a leader in Taiwan’s success in the semiconductor industry.In short, the efforts of the government to ensure the development of engineering fields in this process are very important. For example, the Integrated Circuit Project of the government in 1974 contributed to this company being the best in the semiconductor industry today.
What are the current investment plans, export figures, revenues of TSMC?
Faced with the increasing demand for technological devices and the shortage of chips during the Covid 19 pandemic, TSMC had to stop production for automobile companies in the first place. In order to meet the increasing demand, TSMC had to increase its production capacity and announced that an investment plan of 100 billion dollars was made within three years. According to the news announced on April 1, 2021, TSMC’s shares wew up almost 2% in midday trading. Also, American companies accounted for 65% of TSCM’s total sales. In a news released in October 2021, it was stated that TSMC will build a $12 billion factory in Arizona.
As a result, Morris Chang’s contributions to the establishment of TSMC were great. Chang’s vision and experiences have brought TSMC to its current position. At the same time, playing an active role in the establishment of TSMC in the government has allowed TSMC to grow.
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