The Ledger
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Morris Chang: TSMC's LED venture failed due to restrictive patent concentration
“LED did not take off either, because LED, it's not, the market is not as big as solar. However, it's controlled, the patents are controlled by just a few companies. And they wouldn't let the few companies that control the patterns of LED were not let up at all…”
Chang: NVIDIA became a top-five TSMC customer within three years
“Within two or three years, they were, they did become one of the biggest five customers.”
Chang: Foundries demand running one standardized factory for many diverse customers
“The difficulty was, you know, you have to satisfy a lot of customers, you know, and everyone, you know, wanted the factory to run his way, you know. But you can only run for one way, you know, which will satisfy more or less all the customers. And the advantag…”
Chang: TSMC R&D could not develop two nodes concurrently in 2010
“The point is that back then, R&D did not have enough resources to do two notes at the same time. Later we did. Later we did.”
Chang: TSMC led foundries at 28nm, but trailed Intel
“At 28 nanometers, we were very definitely the leader among foundries. Yeah. And maybe among a few other companies such as Texas Instruments and so on, but not Intel.”
Chang: TSMC historically used six-month probations rather than layoffs
“Well, we never did that, you know. I mean, the worst we would do was to put them on, place them on probation for six months, and quite often, you know, at the end of the six months, everybody would go back to the, to his or his or her old job, and some of them…”
Chang: Apple rejects unprompted supplier pitches until they are ready
“Apple is a very close mouthed company. If you try to talk with, if you offer, you know, your service, I mean, they will just tell you to go away, you know. They will come to see you when they are ready, you That's what I knew about Apple, even then, and I knew…”
Gilbert: TSMC will ramp its 2nm process in the second half of 2025
“I think they're actually doing the small production runs, getting ready to ramp in the second half of this year on the two nanometer process.”
Morris Chang: Sales is tactical with customers, marketing is strategic to the world
“You know, we always had a pretty strong sales effort. But to me, sales effort is just the tactical side with the customers. Marketing is the strategic side to the outside world now.”
NVIDIA raised only $20 million in venture funding prior to going public
“NVIDIA was started in 1993, only ever raised twenty million dollars.”
TSMC announced a $100 billion, three-year capital expenditure plan in 2021
“TSMC just announced they're going to spend a hundred billion dollars in capex over the next three years, thirty billion dollars this year, 60 over the next two.”
Gilbert: Geopolitical threat from China is TSMC's primary existential risk
“That, to me, absent an enormous computing paradigm shift, is the way that TSMC has an enormous risk in the business.”
Morris Chang received zero founder equity when starting TSMC
“It was zero dollars. Morris Chang got no equity in the company. Zero.”
TSMC invested $9 billion and 6,000 workers to build Apple's dedicated fab
“And for TSMC, it meant an initial investment of nine billion dollars, Fabs are expensive to build, and devoting 6000 employees to building a dedicated plant for Apple in just 11 months.”
TSMC was founded with $220M, heavily funded by Taiwan and Philips
“So they put up 28% of the capital. Government puts up 50%. It ends up being two hundred twenty million in total.”
Taiwan implicitly mandated Morris Chang to build an Intel, not a foundry
“And I do think the implication was go start an Intel, or go start an IBM. It wasn't go start the very first pure play foundry.”
Rosenthal: TSMC caught up to chipmaking leaders within 10 years
“Within about 10 years, they catch up and then they start to exceed everybody else.”
Leading-edge semiconductor fabrication is alchemy compared to device assembly
“Assembling an iPhone is completely, completely different than taking a brand new design for a next generation chip and manufacturing that chip. One is manufacturing and one is alchemy. The alchemy can only be done by alchemists.”
Rosenthal: TSMC will likely be sole manufacturer at 3nm node
“So, very likely in the next process, it's just going to be TSMC.”
Rosenthal: TSMC sustained 17.4% annual revenue growth over 27 years
“Since the first IPO in Taiwan in 1994, TSMC has had compound annual revenue growth of 17.4% for 27 years.”
ASML is the sole manufacturer of the world's most advanced chipmaking machines
“They make the most advanced chip manufacturing machines in the world. They're the only company that makes them. They're located still in the Netherlands. Their biggest customer is TSMC.”
TSMC holds over 90% global market share in 5-nanometer chip manufacturing
“In the five nanometer, Samsung has like five, 10% market share, and TSMC has 90 plus percent.”
Munger prefers investing in consumer brand power over semiconductor foundries
“Well, I don't like that as well as I like something with a real consumer brand of its own like Apple.”
TSMC expects its AI hardware revenue to grow 50% annually through 2028
“TSMC, in their last earnings, said that AI hardware currently only represents six percent of their revenue, but all indications over there is that they expect AI revenue to grow 50% per year for the next five years.”
Bathgate: TSMC manufactures a quarter of the world's digital chips
“TSMC fabs a quarter of the digital chips made in the world right now.”
Bathgate: Intel, TSMC, and Samsung bought 25% of ASML to fund EUV
“Intel and TSMC and Samsung partnered and actually bought 25% of ASML to inject capital into ASML to develop EUV systems.”
Johns: Samsung's consumer hardware division creates a foundry trust deficit versus TSMC
“Samsung is also doing logic, but it's, they have a different business model, right? They compete with their customers. So it's harder for their customers to trust them. Whereas TSMC doesn't have that conflict.”
Bathgate: Nvidia has one of the world's best business models
“NVIDIA has got close to 70% gross margins and like, you know, low forties operating margins. I did really with very little cyclicality because TSMC offloaded all that cyclicality. Right. So it is just like one of the best business models besides I would say en…”
Standard Oil pioneered the venture capital model of massive fixed investment
“There's so much tied up here, but one of them is this is kind of the first venture capital business. Like we talked a lot on the TSMC episode about these massive fixed costs... And then it's all a volume game. Like how much can you get the plants at full capac…”
Gilbert: TSMC's Fabs 2 and 3 Built in 1980s Still Operate
“Fabs two and three were the first TSMC specific fabs that they built, and they're still running from the late eighties.”
Gilbert: Semiconductor market grew from $26B in 1987 to $527B in 2024
“Since TSMC was founded in 1987, the world's semiconductor market has grown from twenty six billion to five hundred and twenty seven billion last year.”
Rosenthal: TSMC, Arm, Synopsys, Cadence, and ASML were founded within years of each other
“Not only TSMC, ARM, Synopsys, Cadence, and ASML all founded,
Right within a couple years of each other.”
Chang: TSMC salespeople were instructed to never ignore small customers
“I had always told our salespeople that that we should never be negligent in talking to future customers, even if the customer seems to be a very small one.”
Chang: TSMC gross margins crossed 50% after his retirement
“Now, of course what happened later was that there was COVID and so on, and also we began to have leadership, technology leadership. So our margin, you know. Jumped up to over 50%, but when I retired, I was still short of 50%, slightly short of 50%. I was almos…”
Morris Chang: TSMC exceeded $1 billion in revenue in 1995
“We had exceeded, I remember we had exceeded the one billion U.S. Dollars in revenue in 95, and this was 97.”
Rosenthal: Intel Upgrades Old Fabs Rather Than Keeping Legacy Capacity
“Intel It is constantly taking their existing fab footprint and repurposing it and upgrading it for the leading edge, which, you know, on the one hand is great. It's utilizing their assets, you know, for the most valuable, highest valuable products. On the othe…”
Morris Chang: TSMC used 'business development' because of its Chinese translation
“I decided to use business development in English because it has a good translation in, in Chinese.”
Gilbert: TSMC commands over 50% of global foundry market share
“They have over 50% of the market for foundries, for all contract manufacturing of chips.”
TSMC manufactures all NVIDIA chips and every iPhone and Mac processor
“They make the primary chip inside every MacBook and iPhone shipped today. They're powering the AI wave, manufacturing all of NVIDIA's chips.”
Rosenthal: Morris Chang built his TSMC stake by buying shares with personal cash
“Well, what he did as TSMC started to work, he basically put all of his money into buying. He bought his own shares. In the company. I don't know if it was privately before they went public on the Taiwan Stock Exchange in 1994 and then the New York Stock Exchan…”
Gilbert: TSMC maintains 50% gross and 40% operating margins
“And because they have 50% gross margins and 40% operating margins, they can take that profit and buy more advanced machinery.”
TSMC and Aramco are the only non-US West Coast trillion-dollar firms
“They and Saudi Aramco are the only trillion dollar companies in the world that are not located on the west coast of the United States.”
Rosenthal: TSMC's market cap doubled from $550B in 2021 to over $1T
“TSMC's market cap has doubled since then, From five hundred and fifty billion to over a trillion dollars.”
TSMC is spending $12 billion in Arizona for non-leading-edge fabs
“They are spending, I think, twelve billion dollars this year to start a plant in Arizona, which will not be the three nanometer, I don't even think it'll be the five nanometer.”
Chip-on-Wafer-on-Substrate advanced packaging accounts for 10% to 15% of TSMC's capacity
“So COOS represents right now about 10 to 15% of TSMC's capacities, and many of the facilities are custom-built for exactly these types of chips that they're producing.”
Semiconductor chips cannot be etched larger due to extreme ultraviolet photolithography limits
“Due to a quirk of the extreme ultraviolet photolithography that we talked about, the EUV on the TSMC episode, chips are already the full size of the reticle. It's a physics and wavelength constraint. You really can't etch chips larger without some new inventio…”
Nvidia split consumer and data center GPU architectures in September 2022
“Up until NVIDIA's current GPU generation, the hopper generation of GPUs for the data center, there was only one GPU architecture at NVIDIA, and that same architecture and those same chips from the same wafers made at TSMC, some of them went to consumer gaming …”