TSMC Founder Morris Chang - Acquired  ## Metadata - Author: **Acquired** - Full Title: TSMC Founder Morris Chang - Category: #podcasts - URL: https://share.snipd.com/episode/853313d3-1dba-4228-bd1d-da6e4fc4dfcb ## Highlights - **28nm Sweet Spot** - Morris Chang's R&D team believed 28nm would be the "sweet spot" node, like hitting a tennis ball perfectly. - Trusting his team, Chang increased capital spending to accelerate its development. Transcript: Morris Chang I was like you, you know. Like 40 years ago, I was like you. I don't play anymore. But, you know, so I know the feeling of hitting the ball in the sweet spot. 28 down here is in the sweet spot. And so I said, why? He gave me a lot of technical reasons. So I decided I would believe him. And he now had the resources to push it, to do it as fast as he could. So, you know, now the capital spending. Now, of course, back then we had already built up pretty good infrastructure, organizational infrastructure. We had a pretty good market forecasting group. And I had set up the business development department, which was like a marketing department. We always had a pretty strong sales effort. But to me, sales effort is just the tactical side with the customers. ([Time 0:44:24](https://share.snipd.com/snip/fc95bbf7-a5c1-44da-b6d6-2ae4e27027ed)) - **Independent Directors Challenge 28nm Investment** - TSMC's independent directors strongly opposed Morris Chang's proposal for a significant capital investment in 28nm technology. - Despite their concerns, Chang asserted his responsibility for company operations and proceeded with the investment, ultimately leading to success. Transcript: Morris Chang The general counsel is also the secretary to the board. Yeah. They called him. At that time, it was an American. The general counsel was an American, and said, we want to talk to the chairman. We don't like this idea at all. Anyway, so I talked to them on the phone about a week so before the board meeting and all right you know this is something that of course i told them what i have now just told you inputs from Our market forecast inputs from our r&d inputs from our business department, the new business department department. And of course, you know, they didn't believe it. You really can't convince anybody on something like this. So at the end, I had to say, well, look, I heard you, but I am still the guy that's responsible for the operation of the company. So you need to let me go ahead with this one. So they were satisfied with that. And what was the result? Ben Gilbert What happened around this era of 28 nanometer that created so much demand? I think you know the result. ([Time 0:49:31](https://share.snipd.com/snip/6c6b2cb6-3d2a-4d87-9567-29c75458e7e0)) - **Winning Apple's Business** - Morris Chang's wife, Sophie, unknowingly hosted a pivotal dinner with Terry Gou (Foxconn CEO) and an Apple VP. - This dinner was crucial to TSMC securing Apple's business, even though Sophie didn't fully grasp its significance at the time. Transcript: Morris Chang I don't think she understood the significance of Terry Gao coming to dinner, bringing a vice president from Apple. I don't think she quite understood, quite really. She wasn't very interested either in the significance of that. Ben Gilbert And you had been trying for months, strategizing with the business development team, how do we go win Apple's business? The iPhone seems to be working. Yeah. Morris Chang I mean, strategizing is probably too strong a word. I mean, just thinking. Also knowing that we just can't do anything about it. Apple is a very close-mouthed company. If you try to talk with them, if you offer your service, they will just tell you to go away. They will come to see you when they are ready. That's what I knew about Apple. Even then. And I know the same thing now. Yeah. Alright. So 8 o'clock. Now Sophie did know that I would not be home until after ([Time 1:08:49](https://share.snipd.com/snip/72564c55-cb2c-4edf-b494-03478fe3ec39)) - **Dinner with Apple** - Morris Chang recalls Jeff Williams, Apple's COO, visiting for dinner to discuss Apple outsourcing their chip manufacturing. - Williams got straight to business, talking about 80% of the time, even though Chang's wife had prepared extra dishes. Transcript: Morris Chang But, you know, it wasn't important. The food was not important. Either the quantity or the quality was not important because almost Jeff almost immediately started his pitch, you know, almost as soon as he sat down to dinner. Ben Gilbert And what is the pitch from someone like Jeff Williams like? Morris Chang We would like you to foundry our waivers. Something like that. Pretty straightforward. I mean, so I listened. That night, I think, Jeff talked maybe 80%, and I talked 20%. If you don't count the relative-to talk between Sophie and Terry, you know, which was not very much either. And Jeff had proposed economic terms at this first dinner, right? No, nothing so concrete. He did say that we would let you have 40% gross margin. And I think, I didn't say anything. I didn't answer him. ([Time 1:12:57](https://share.snipd.com/snip/add63cc9-831e-4d43-af00-1dc0351d6048)) - **Apple's 20nm Detour** - TSMC founder Morris Chang recalls when Apple wanted them to produce 20nm chips, which was a detour from their planned 16nm progression. - This presented a resource allocation challenge, as TSMC's R&D couldn't handle two nodes simultaneously. Transcript: David Rosenthal Half step. Morris Chang A half step. But a half step is a detour, you know. We would have to, my thought at the dinner there, was that we would have to spend effort on the 20, which, of course, would help us on the natural next note, which was 16. But still, it was a detour from 28, you know. From 28, if we could go directly to, it would be less time than first do 20 and then. Now, the point is that back then, R&D did not have enough resources to do two nodes at the same time. Ben Gilbert Later, we did. Later, we did. So you have this conundrum where this is right after you had just spent $6 billion in CapEx the previous year going all in on 28 nanometers. You're asking Apple, which could be your biggest customer ever, this is for 28, right? And you hear back, no, we want you to go do something that you're not planning on spending any money on and have this huge distraction. And you're, of course, left with this question, is it worth it to land Apple as a customer? Morris Chang It wasn't that serious. It wasn't that serious. ([Time 1:18:31](https://share.snipd.com/snip/834f8f3b-ac21-4772-9824-180a342ed330))