Morris Chang & Taiwan Semiconductor Manufacturing Company

An English translation of Chang's speech on learning

Jun 23, 2021

Taiwan Semiconductor Manufacturing Company (TSMC), a company with a market cap of 600 billion USD (placing them as the 9th largest company in the world by market cap, only losing out to the FAANG companies, Berkshire and Saudi Aramco) remains a company largely unknown amongst Western ears. TSMC is a one-of-a-kind pure-play semiconductor foundry, which means, in plain English, that the company does not design semiconductors, nor do they market any semiconductors with their own brand label and sell them. Their revenue comes from long-term supply/manufacturing contracts to heavyweight customers such as Apple, Nvidia, Qualcomm, etc. Semiconductors are notoriously hard to manufacture, the industry was known to be highly cyclical with unstable revenues (until the recent worldwide semiconductor shortage). TSMC distinguishes itself by providing smaller-scale design teams to outsource manufacturing (which requires expensive equipment and heavy capital expenditures), thereby allowing smaller firms to flourish, and TSMC flourishing along with its customers. TSMC, due to its unique business model, is considered to have only 2 main competitors. Samsung (which runs a pure-play foundry) and Intel (US semiconductor giant, designs and manufactures semiconductors, distinct model from Samsung and TSMC). TSMC is affectionately called “护国神山“by Taiwanese locals (the phrase can be loosely translated to mean a mystical mountain protecting the country).

A cursory glance at TSMC’s annual report reveals the outstanding nature of the company:

· US$45.51 billion Revenue in 2020

· US$17.60 billion Net Income

· Planned Capital Expenditure of US$ 100 Billion over the next 3 years

· The Company has vowed since its inception to never compete with its customers. TSMC has never designed, manufactured, or marketed any integrated circuits under its own name

· Having a long-term vision and long-term strategies

· Treating customers as Partners

As reported in the WSJ on June 19th, TSMC is navigating itself as the ‘Switzerland’ of the semiconductor industry. The development of TSMC in the industry is akin to a cunning general navigating its way around neighbors gunning for its life. No doubt the strategic positioning of TSMC in Taiwan (and its geopolitical difficulties with China) was all part of a well-thought master plan by its eccentric founder, Morris Chang.

Who started TSMC?

TSMC was founded in 1987 by Morris Chang. Morris Chang is an exceptional strategist and entrepreneur; his founding of the company should be studied by every aspiring entrepreneur. Unlike most business executives, Morris Chang is a littérateur, with deep knowledge of the humanities both East and West. Chang was born in Ningbo in China, in his biography, he aspired to become a writer/novelist but was dissuaded by his father. Due to several wars in China, Morris moved several times back and forth from China to Hong Kong. He graduated from high school aged 18, and with encouragement from his father and an uncle in the US, applied to Harvard University and was accepted. He was the only Chinese undergraduate at Harvard when he enrolled. In his second year, he transferred to the Massachusetts Institute of Technology and completed his bachelor’s and master’s degrees in Mechanical Engineering in 1952 and 1953, respectively. He wanted to pursue a Ph.D. at MIT but failed the entrance examination twice, he then left school and found a job at a small semiconductor firm.

Ultimately, he was hired at Texas Instruments and became a VP, however, when he was in his mid-50s, he was, in his own words, ‘put to pasture’ at the company. Before he started TSMC, he was at the pinnacle of his field, being “at a position where he could see beyond the horizons of the semiconductor field’. With a precipitous turn, he left Texas Instruments and was recruited to a research arm in Taiwan, from where he started his company, TSMC.

On the importance of learning (A translation of Morris Chang’s speech)

TSMC was a pioneer of the pure-play foundry business model. So how did Morris Chang accurately perceive the need for such a business model? The paucity of reporting on Morris and TSMC is unhelpful for those of us wanting to know more. Chang’s biography tells the story of his life as a student and his early career. (Chang told reporters that he is in the midst of completing his biography, for now, readers can only find part 1 of his biography, in Mandarin Chinese)

What we do know is that Morris Chang developed a rigorous appetite for lifelong learning, as he explains it, he sees lifelong learning as a goal to be pursued by everyone (Sounding very much like Confucius, espousing the need for self-improvement). Below I produce a translated transcript he gave in Hsinchu Park in a fundraiser event (he gave several talks with substantially similar content as the one produce below to university students in Taiwan)

http://teacher.yuntech.edu.tw/wuja/course/heart/learning.htm (Original transcript in Mandarin, Traditional Chinese Character. I translated the speech personally in an hour, it is virtually certain that there are many mistakes as I am no professional translator. Any ambiguities or questions that you have please comment below and I will try my best to clarify them)

“On Learning” by Morris Chang

Most of us presuppose that learning only occurs during our time in a formal educational institution, in my case, having undergone primary education for 6 years, middle and high school for another 6, 4 years of undergrad, and my masters and Ph.D., an additional 5 years. That is a total of 21 years in an institution of learning, what did I actually learn?
[If you are lucky enough to have lived in Paris as a young man, then wherever you go for the rest of your life, it stays with you, for Paris is a moveable feast]. This phrase best describes my 21-year period of education.
2 years ago, I started writing my biography, having referenced past materials left behind over the years, and my PhD thesis written more than 30 years ago. I found that I could not understand most of what I wrote. I then proceeded to flip through my college engineering textbooks, again, I could not understand most of what was written. When I recall my past decades of work, I realized that the knowledge I gained at MIT and Stanford was only useful in the first 5 years of my career, and only 20~30% of it was useful. During the later stages of my career, knowledge directly applicable to my work was nil. Hence, I said that when school was a ‘moveable feast’, I am not referring to the vocational knowledge gained. The phrase ‘A moveable feast’ comes from the author Ernest Hemingway, he once said: “[If you are lucky enough to have lived in Paris as a young man, then wherever you go for the rest of your life, it stays with you, for Paris is a moveable feast]. This phrase described my 21-year period of education.” (Morris repeats what he said again, not a translation error)
How did I arrive at such a conclusion? My own analytical process devised 3 reasons:
·         First, school is the best place for you to cultivate your curiosity, in other words, what you must do is seize the opportunity to develop various interests, no matter if it is in the fields of literature, art, or science, is your mindset of curiosity.
·         Second, you must develop the habit of learning, including the habit of lifelong learning. If young people do not develop a strong interest in learning in school, and they do not develop the habit of learning, my thoughts are: he is wasting his time. Even if he gets the best grades, and he can memorize textbooks with complete precision, it’s useless.
·         Third, develop the skill of independent thinking. Learning is only an input, an important process to develop is the internalizing process, to further expand upon your thinking. Curiosity and the habit of learning are foundational skills, if you do not develop this early on in life, you are wasting your time and your youth. Independent thinking is an even deeper, harder skill, if you intend to achieve extraordinary skills, it is inevitable to possess the skill of independent thinking.
Truthfully, most people talk about [lifelong learning] (a Chinese phrase essentially meaning we should all learn continuously till old age), that is not the kind of learning I advocate for. The kind of learning that everyone should endeavor towards is a kind of learning that has 3 important elements, it should be:
1.    Goal-based
2.    Disciplined
3.    Having a plan for your self-education
(1) Setting a goal
Lifelong learning requires setting a long-term goal, or lifelong goal, you have to develop separate plans for learning in different timespans, ranging from decades to days. For example, I think everyone should have a goal of keeping with industry knowledge within one’s career. Doctors, scientists, engineers should all keep with the latest fads and trends in their own careers. When I left school, I joined the semiconductor industry, therefore my learning goal was to keep up with the developments of the semiconductor industry. When I was involved in cutting-edge technology, I demand that I keep with the latest developments in the industry. When I transitioned to a business/management-oriented position, my goal was to keep up with developments and progressions of semiconductors generally.
If you work in the banking industry, can you imagine bankers who graduated 30, 40 years ago, even those from the best schools, their everyday job involves storing, releasing credit, issuing government bonds, and earning the spread in those activities, it is a simple task. When I was working in the US, people often told me, bankers have it the easiest, they are in the country club by 3 pm every day. The current banking line has undergone a tremendous change, money now transcends between regions, time zones, thus the banking line has been affected by the global monetary system. In a few years, I believe the Internet will have an even bigger impact on the banking industry. If you cannot keep up with the latest technological developments, you will be at risk of losing your job in 10 or 15 years. Those working in tech and engineering have even shorter career lifespans. When I left school, I did not even know what a transistor was, I wasn’t ignorant, truthfully there weren’t many people then who understood what a transistor was. But even after a few years, many people started to grasp its importance. If you are unable to stay at the frontier of knowledge, you will not have a job waiting for you. Therefore, everyone should have the lifelong goal of keeping with the trends of their own industry.
For your short-term goals, there is a much broader choice, it could be what you are interested in, or work-related education. As a tech worker, engineer, or R & D guy gets promoted to be a manager, financial and sales knowledge are a must. Without this basic knowledge, you should plan to learn everything you can in 6 months. If not, you will not prosper in your new position, this is a goal everyone can set for themselves.
As for learning based on your own interest, I’d like to tell an example of my own/ I inadvertently discovered that the French King Louis XIV and Kangxi Emperor of the Qing Dynasty were contemporaries, they would not be aware of the existence of each other, but both of them are equally capable, but due to the different demands of their respective country, the ultimate developments of their nations were different. This piqued my interest, and I spent the next few months researching the histories of the 2 greats. In the musical arena, I recommend Gustav Mahler’s works to anyone with the slightest of interest, there aren’t that many of them anyway and those with a basic background in music will become an expert in just a few months. Unlike Beethoven (requiring at least 2 years of experience). All the above are hobbies and interests unrelated to professional work. If you are interested in literature (novels), you can do some short-term research on certain authors of certain eras.
(2) Discipline
The 2nd element of lifelong learning is discipline, which means you have to acquire the dedication to learning. Deciding how much time to allocate to lifelong learning is a pretty serious matter. Listening is a skill that must be developed. The key to listening is [focus], when I was lecturing at National Chiao Tung University, I gave an hour-long talk on the importance and techniques of learning. The common understanding for workers is to develop your speaking skills, omitting the skill of listening, which is the more important skill. In my experience, if a listener fully understands a speaker’s words, his efficiency is thus 100%, but most people can’t even attain a 50% efficiency. To learn better, the first requirement is to improve one’s efficiency of listening. The 2nd requirement is to internalize what you have heard. I carry around with me a small notebook, this is one of my tools for learning, every time I hear some news or concepts that captivates me, I will note it down. The notebook must be the appropriate size, not too big or small. The benefits are many, for instance, [To know thy enemy], I pay close attention to the financial statements of my customers, there are many sources of this information, all US-listed companies provide this publicly. The Wall Street Journal reports it as well, but all this news, if you do not note it down, if you don’t internalize and digest the information, your efforts will be futile. I have a standard-sized notebook, when I am reading financial statements at home, I will note down the important points in them, and review them bi-weekly or monthly, just like studying from textbooks, this is the internalizing process. Of course, you can’t remember everything, but you will not miss the important points- for example, if a customer is facing imminent bankruptcy, or growing quickly, you will definitely remember this. When I talk to customers, they are surprised that I know so much, and that’s when I tell them all this information is public, other people just don’t notice it.
Lifelong learning requires discipline, it is a time-consuming and serious endeavor. Good lifelong learning definitely affects one’s life habits. I read daily for 2 hours, it could be work-related information, customers’ financial reports, or just reading what I am interested in. I read French and Qing-dynasty history, listen to Mahler’s music, when I was young, I did this for 4 hours daily. I now do it for only 2 hours, but during the weekends, 8,9 hours are spent listening to music and reading. With these habits, you will not enjoy business meetings and pointless socializing, you have much more enjoyable things to pursue.
As for sports, golfing is not very efficient, running on the treadmill 30 minutes a day is the most efficient way of exercise, it is several times better than Golding, looks like the disciplined way of learning will affect one’s own individual habits.
(3) Have a plan
The last element of lifelong learning is having a plan, learning without a plan is a half-hearted effort. A plan means having a long term and a short-term plan. The newspapers, magazines, books or talking to people, all these require serious planning. Especially talking to people, because your lifestyle choices will dictate your social circle, you have to have a plan to expand your social circle. I was very interested in economics, trends, and related topics, the acquaintances I have are thus academics and economists. However, when you decide to socialize with these people, you have to possess a solid foundation of knowledge, or it will be hard to have any spark with these people. As to the method of getting to know these people, the best way is to know where they will appear (in forums, universities, etc), take an opportunity to get to know them. Based on my interaction with economists, I noticed that newspapers frequently misrepresent the opinions of world-renowned economists. I noticed this because I paid attention and I acquired a basic understanding of their work.
Moreover, taking time to expand your knowledge in an academic environment is mandatory. Every year, you should take out 1 week or 2 weeks of leave to go back to school. Even if the lectures are not formal, you can participate in research seminars 5~10 times a year. Listen seriously and take notes, only then will you absorb the knowledge.
Ultimately, schools are where curiosity, learning habits, and independent thinking are fostered. It follows inevitably that one does not have to enter university, or even graduate school to develop these skills. We often see early school leavers achieve great things, and their thoughts/knowledge are better than those who went through formal education, this is due to their superior learning habits.
I often ask myself: What is the benchmark/yardstick for a successful school? A common answer is better faculty, better equipment, these are of secondary importance to me. I think that a school’s most important asset is its students, having good students surrounding yourself will help in developing your curiosity and learning habits. If a person, having graduated, still talks much about where he graduated from is meaningless. Unless you have a circle of close friends, that is what remains valuable about your time in school. If school is only an institution to absorb knowledge, there is nothing much to reminiscence about. I have seen people in their forties, fifties, sixties even seventies, they like to boast that they graduated from XX- name-brand schools. Whenever I hear these talks, it is unsettling, they portray an image that these schools are very selective in who they admit, in other words, they thought of their time at school as their peak in life, and everything since then is a steep decline. You will notice, those who speak of their fancy schools all the time, their peak in life is when they got into a name-brand school. If anyone here has this habit, I urge you to correct it.
My talk ends here, feel free to ask any questions.

[Interestingly, one of the audience asked where Morris graduated from. His reply was that he graduated from MIT and Stanford. He did not enjoy his 5 years at MIT, most people there focused only on developing technical, vocational knowledge. He thought of his education at Harvard (and even his high school) as superior to MIT. P/S: He told the dean of MIT that MIT was not a great school]

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