Morris Chang

“We were sitting down with Morris Chang, and he was talking about TSMC, and he told us that one of the ways that they aired was trying to exit the integrated circuit market, or diversify from that market, and go into solar. Memories, and there was one other thi…”

“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.”

“Another problem was the immediate one that triggered me to retake the CO ship because the previous CO had laid off, except he didn't use the term laid off, you know. He used the bad performance review, the worst performance review people, and there were about …”

“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…”

“People would not respect us if we lay off by performance ratings. [1196] Ben Gilbert: And why is that? [1198] Morris Chang: Because it's very subjective. Performance reviews, the performance ratings are done by everyone's own supervisor. So, the 700 was perf…”

“If in a year you have to hire people back, you have to hire the laid off people back, then you shouldn't lay off, because the layoff, the separation expense is usually half a year, about half a year, and it takes at least half a year to train a person. So if y…”

“So I said to him, if you want to lay off, bring it to the board. I'll call a special board meeting. And I knew what I would ask the board to do, you know, which was not to grant the permission. That's right. But he decided to circumvent that, the CEO, you know…”

“Well, as far as the CO is concerned, I didn't keep him. I had More than one nice talk with him. I intended to, and I told him that he was still a potential, ah, successor to me. So I kept him at the same job grade, we have job grades, and the same salary and b…”

“Yes. More than a hundred million. And I also said, our offer is effective, 48 hours. If you do not, there is not going to be, we are not going to argue, we are not going to bargain. If you don't accept the offer within 48 hours, we will have to go to an arbitr…”

“At that time, when I was the head of Worldwide Semiconductors, our R&D budget, Was, 4.8% of revenue, of our revenue, and I thought it was not enough. I just wanted to raise it to 5.5% of the revenue, but my request was denied all the, every time I raised it.”

“So I almost just literally picked a number out ahead. We've been running six or seven percent already. So I said, oh, let's pick eight percent. Okay. Yeah. Eight percent, regardless of Whether there's a recession or not. And it's just eight percent of revenue…”

“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.”

“Setting the R&D at eight percent of did not, Invite any opposition from the board, but suddenly increasing capital spending, threefold, I think, did invite a lot of questions from the board.”

“No, I didn't. Maybe the business development guy, I mean, that was another interesting story. Yeah, maybe he knew. Maybe he, or at least, I now hope and I, of course, hoped at that time, too, that he had a more detailed visibility than I did”

“I decided to use business development in English because it has a good translation in, in Chinese.”

“So, I, ah, first offered the marketing, ah, business development job to the guy who was in the Bigger job, advanced technology, Mark. And I explained to him that I did not think he had had any significant marketing experience in the past, and this would, this …”

“Actually, back in my mind, I was thinking of the time when Kissinger was Nixon's national security advisor, and somebody else whose name I have even forgotten was the Secretary of State. And Kissinger, you know, probably had a couple hundred people reporting t…”

“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…”

“He did say that we will let you have a 40% gross margin, and I think, well, I didn't say anything. I didn't answer him. I didn't respond to that, but our margin at that time was already 45%, and I was trying to put it up to 50%.”

“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…”

“Technology. At that time, we thought we were almost at par with Intel. Almost. In fact, I thought we were, I think I thought we were at par with Intel at that time. Manufacturing. I thought we were better than Intel. And customer trust. We thought that our cus…”

“And anyway, he told me there's nothing to worry about because Intel just does not know how to be a Foundry.”

“Before this Apple thing, Apple and we, before Apple became our customer, I knew a lot of Intel's customers in Taiwan. You know, all the PC makers are Intel's customers. I mean, they, none of them liked Intel. None of them.”

“So we declined without having to think about it at all. We declined the IBM office. And IBM, in fact, was quite angry, you know. I mean, they thought we're still a small Taiwan backward place, you know. It's a Taiwan company, and they are going to pick IBM. So…”

“I really did not develop. I certainly did not initiate it. I think I had a role at TI. I had a role in refining it to the point where a semiconductor company can use it effectively.”

“TSMC's size and importance exceeded my expectations, but not by an order of magnitude, you know.”

“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…”

“The insight is that like the goal that you are playing for is to be the largest volume player kind of at the end of the game. So if you take that as a given of like, if we get to be the largest volume player, this is a fixed cost business. This is a scale econ…”

“Morris Chang is Founded TSMC at age 56, retired at 74, then came back at age 78, inked the deal to make all of Apple's chips”

“So, after he gets his master's in the three years, Morris wants to stay and do a PhD, fully complete his technical training, but he ends up failing his qualifying exams twice.”

“The biggest semiconductor company in all types, digital, analog, everything at that time was not in California. It was in Dallas, Texas. It was Texas Instruments.”

“After about four months, he gets the yields at the TI plant up to 20%. So twice as good as the first party line at IBM.”

“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.”

“It was zero dollars. Morris Chang got no equity in the company. Zero.”

“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…”

“And to think you're going to re-onshore a fab and ignore Morris Chang is just kind of crazy to me. And I look at the Requirements, once again, that we put on companies around labor and say to myself, it's not going to happen here.”

“It's like Morris Chang and TSMC. It's like, he invented the notion of a fabulous semiconductor company before there was any demand for that, and then it turned out that his timing was exactly right, that, like, within a couple of years, a whole ton of, you kno…”

“Morris Chang was 56 years old when he founded TSMC, and TSMC is today, I believe, the 11th most valuable”

“TSMC has lower margins than most of their gross margins than most of their customers. And so at any point they could probably take the margins from 50% to 60% and say, Hey, I'm obviously have a monopoly in this market, but the way, you know, Morris Chang archi…”