The Semiconductor Revolution and Morris Chang’s Vision

When examining the industrial revolutions throughout human history, it becomes clear that each era was shaped by a fundamental production technology that determined its economic and technological development. While the steam engine drove the 19th century and the oil and automotive industries defined the 20th century, semiconductors have become the most strategic product of the 21st century. Today, nearly every modern technology—from smartphones and computers to artificial intelligence systems, electric vehicles, medical devices, and defense technologies—depends on microchips.

Manufacturing microchips is one of the most complex industrial processes in the world. Building a semiconductor fabrication plant requires not only enormous financial investment but also advanced engineering expertise, precision manufacturing techniques, and years of accumulated experience. For this reason, companies that designed chips traditionally manufactured them in their own fabrication facilities.

Founded in Taiwan in 1987, Taiwan Semiconductor Manufacturing Company (TSMC) changed this approach. The company became the world’s first independent semiconductor foundry (Pure Play Foundry) focused exclusively on manufacturing and has since become the primary production partner for many of the world’s largest technology companies, including Apple, NVIDIA, AMD, Qualcomm, Broadcom, and MediaTek.

However, TSMC’s success is based not only on its investments in advanced technology but also on the decades of experience of its founder, Morris Chang, and the extraordinary business model he developed.

The Transformation of the Semiconductor Industry

The invention of the transistor at Bell Laboratories in 1947 marked the beginning of a new era in electronics. Replacing vacuum tubes, transistors enabled the development of smaller, faster, and more reliable electronic devices. In 1958, the invention of the integrated circuit made it possible to place hundreds—and later millions—of transistors on a single silicon chip.

During the 1960s and 1970s, companies such as Intel, Texas Instruments, Motorola, Fairchild Semiconductor, and NEC became pioneers of the semiconductor industry. What these companies had in common was that they both designed and manufactured their chips in their own fabrication facilities. This business model later became known as the Integrated Device Manufacturer (IDM) model.

In the early years, this system proved successful. However, as technology advanced, manufacturing processes became far more complex. Building a next-generation semiconductor fabrication plant required investments worth billions of dollars. Lithography machines, cleanrooms, and precision manufacturing equipment became extraordinarily expensive, making it especially difficult for newly established companies to enter the market.

By the 1980s, the industry faced a significant challenge. Small companies were developing innovative chip designs but lacked manufacturing facilities. Large corporations capable of building fabrication plants, on the other hand, used their expensive production capacity exclusively for their own products. As a result, many innovative ideas struggled to reach the market, slowing technological progress across the industry.

Who Is TSMC Founder Morris Chang?

Morris Chang, the founder of TSMC, was born in Zhejiang Province, China, in 1931. His childhood was shaped by the hardships of wartime, and at a young age he moved to the United States to continue his education. He first studied at Harvard University, later earned a degree in Mechanical Engineering from the Massachusetts Institute of Technology (MIT), and completed his master’s degree at Stanford University. The engineering education Chang received at Stanford laid the foundation for the career that would later reshape the global semiconductor industry.

Chang began his professional career at Sylvania Electric Products. After a short time there, he joined Texas Instruments in 1958. This decision would influence not only his own career but also the future development of the semiconductor industry.

During his nearly 25 years at Texas Instruments, Chang held numerous positions ranging from manufacturing engineer to senior executive. While working there, he not only contributed to technological innovation but also closely analyzed the economics of semiconductor manufacturing. He observed that production costs continued to rise and that building new fabrication plants had become nearly impossible for emerging companies due to the enormous capital required.

After leaving Texas Instruments in 1983, Chang joined General Instrument as President and Chief Operating Officer (COO). This role gave him valuable experience in managing large-scale technology companies and deepened his understanding of industrial operations.

In 1985, the Taiwanese government invited him to Taiwan and appointed him President of the Industrial Technology Research Institute (ITRI). It was here that the idea for TSMC began to take shape.

An Idea That Changed the World

During his work at ITRI, Morris Chang realized that the semiconductor industry’s greatest challenge was not chip design, but manufacturing. Many entrepreneurs could design innovative processors, but they were unable to bring their products to market because they lacked fabrication facilities.

“The company that designs a chip does not have to be the same company that manufactures it.”

This idea completely challenged the industry’s traditional business model. Until then, major companies handled both chip design and manufacturing internally. Chang argued instead for the creation of an independent company dedicated solely to manufacturing.

Under this model, startups would no longer need to invest billions of dollars in semiconductor fabrication plants. Instead, they could focus entirely on design and innovation, while manufacturing would be handled by a specialized company with the necessary expertise.

This business model became the foundation for the success of today’s fabless companies—businesses that design microchips without owning fabrication facilities—such as NVIDIA, Qualcomm, Broadcom, and later Apple.

The creation of TSMC represented more than the founding of a new company; it marked the complete redesign of the semiconductor industry’s business model. Morris Chang’s manufacturing experience at Texas Instruments and General Instrument, combined with his work at ITRI, laid the foundation for one of the most influential technology companies in history.

For this reason, Chang argued that Taiwan needed to take a different path. Instead of designing processors under its own brand, the new company would become an independent manufacturer dedicated solely to producing the world’s highest-quality chips.

Who Founded TSMC?

In 1987, Taiwan Semiconductor Manufacturing Company (TSMC) was officially established and began operations as the world’s first semiconductor manufacturer based on the Pure Play Foundry model. The company’s goal was not to develop its own products, but to manufacture chips designed by other companies to the highest quality standards. This approach represented an entirely new business model for the semiconductor industry.

At the time of its founding, TSMC had an initial capital investment of approximately US$100 million. Considered a substantial investment at the time, the funding came from both the public and private sectors.

This ownership structure provided the company not only with financial backing but also with international credibility.

Today, TSMC is no longer controlled by a single individual or organization. As a publicly traded company, its shares are owned by institutional and individual investors from around the world. Its largest shareholder is Taiwan’s National Development Fund, holding approximately 6.38% of the company. Other major institutional investors include Capital Research, BlackRock, Vanguard, Fidelity, and the Government of Singapore. This shareholder structure reflects TSMC’s position as a professionally managed global technology company with a broad investor base.

What Was Philips’ Contribution to TSMC? Why Did It Invest?

One of the most important partners in TSMC’s founding was the Dutch technology company Philips. Its contribution extended far beyond financial investment.

• Semiconductor manufacturing technologies,
• Technical expertise in production processes,
• Patent and licensing support,
• An international customer network

These contributions played a crucial role in enabling TSMC to achieve world-class manufacturing standards within a relatively short period. The partnership significantly accelerated the company’s early development.

Where Was TSMC’s First Factory and Who Were Its First Customers?

TSMC’s first fabrication plant was built in Taiwan’s Hsinchu Science Park. During its early years, production capacity was limited, and the company’s greatest challenge was attracting customers.

At the time, major companies such as Intel, Motorola, and Texas Instruments continued to manufacture their own chips in their own facilities. As a result, many industry observers believed Morris Chang’s business model would not succeed.

However, TSMC’s greatest advantage was its neutrality. Because the company did not produce processors under its own brand, it never competed with its customers. Chip design companies trusted that their intellectual property would remain protected and increasingly chose TSMC as their manufacturing partner.

Among TSMC’s earliest customers were ASIC design firms and small semiconductor startups. Instead of building their own fabrication plants, these companies relied on TSMC’s manufacturing services, allowing them to bring their products to market much more quickly.

What Is the Foundry Model?

A foundry is a manufacturing company that produces chips designed by other companies without designing or selling chips under its own brand. By the early 1990s, semiconductor manufacturing costs had risen dramatically. Developing next-generation manufacturing technologies required investments worth billions of dollars, confirming Morris Chang’s vision.

Many emerging companies realized it was far more efficient to focus on chip design while outsourcing manufacturing to TSMC. This gave rise to a new type of company known as a “fabless” semiconductor company. Under this model, companies concentrated solely on chip design, while manufacturing was handled by specialized foundries such as TSMC. This approach allowed technology companies to invest more heavily in research and development, while TSMC benefited from economies of scale by specializing exclusively in manufacturing.

By the late 1990s, TSMC had become not only Taiwan’s leading semiconductor manufacturer but also one of the most important semiconductor companies in the world. The company continuously improved its manufacturing technologies, raised quality standards, and expanded its customer base.

In the years that followed, many of the world’s largest technology companies—including Apple, Qualcomm, NVIDIA, AMD, Broadcom, and MediaTek—selected TSMC as their manufacturing partner. Today, TSMC serves not only fabless chip designers but also companies with their own fabrication facilities, such as Intel, NXP, and Texas Instruments.

TSMC’s success is rooted not only in Morris Chang’s vision but also in Taiwan’s long-term technology strategy, Philips’ technical support, and the company’s strong initial capital of approximately US$100 million. By pioneering the independent “manufacturing-only” foundry model, TSMC transformed the semiconductor industry’s business model and paved the way for a new generation of technology companies.

By the end of the 1990s, TSMC had become far more than a successful startup—it had established itself as an indispensable manufacturing partner within the global semiconductor industry. This remarkable growth laid the foundation for the strategic partnerships it would later build with companies such as Apple, NVIDIA, and AMD.

Artificial Intelligence and TSMC’s Future

The development that ultimately made TSMC one of the world’s most important technology companies was the digital transformation that accelerated in the 2000s. The widespread adoption of smartphones, the growth of cloud computing, the increasing demand for high-performance processors, and more recently the rapid expansion of artificial intelligence applications have all driven an unprecedented need for advanced microchips. This shift placed TSMC at the very center of the global technology ecosystem.

Why Did Apple Choose TSMC?

By the late 2000s, the smartphone market was expanding rapidly. Apple was looking for a reliable manufacturing partner capable of producing the processors designed for the iPhone and iPad using the most advanced manufacturing technologies available. TSMC distinguished itself through exceptional manufacturing quality, low defect rates, and continuous investment in cutting-edge process technologies.

TSMC began trial production of Apple’s A5 and A6 processors in 2011 and later became the primary manufacturer of the A8, A9X, and the subsequent generations of Apple Silicon processors. This partnership significantly increased TSMC’s revenue while further strengthening its international reputation. Today, Apple remains one of TSMC’s largest customers. The strategic partnership with Apple also attracted the attention of other leading technology companies and played a major role in accelerating TSMC’s global growth.

NVIDIA, AMD, and the Artificial Intelligence Revolution

From the mid-2010s onward, the rapid advancement of artificial intelligence, big data, and cloud computing significantly increased the demand for high-performance processors. In particular, NVIDIA, known for its graphics processing units (GPUs), and AMD, a leading manufacturer of high-performance processors, required access to the most advanced semiconductor manufacturing technologies.

TSMC gained a competitive advantage by successfully developing 7-nanometer, 5-nanometer, and later 3-nanometer manufacturing technologies. These advanced process nodes enabled the company to manufacture a large share of the processors used in AI servers worldwide. NVIDIA’s AI accelerators and AMD’s next-generation processors are produced using TSMC’s cutting-edge manufacturing technologies. These achievements transformed TSMC from a contract manufacturer into one of the most critical companies powering the age of artificial intelligence.

TSMC’s Strength Today

Founded with approximately US$100 million in initial capital, TSMC has grown into the world’s largest semiconductor manufacturer. The company is now one of the most influential organizations not only in Taiwan’s economy but also across the global technology industry. Every year, millions of silicon wafers are processed in TSMC’s fabrication facilities, producing advanced microchips for many of the world’s leading technology companies.

TSMC’s success is built on three key pillars:

• Continuous investment in research and development,
• A commitment to maintaining leadership in semiconductor manufacturing technologies,
• A neutral business model that never competes with its customers.

This strategy has enabled TSMC not only to retain its existing customers but also to become the preferred manufacturing partner for emerging technology companies and startups.

Geopolitical Importance

TSMC’s growth is significant not only from an economic perspective but also from a geopolitical one. Today, advanced microchips are indispensable for defense technologies, communication systems, artificial intelligence, and critical infrastructure. As a result, TSMC’s manufacturing capacity is regarded by many governments as a strategic national asset.

In recent years, the company has expanded its manufacturing footprint beyond Taiwan by building new fabrication facilities in the United States, Japan, and Germany. These investments are intended to strengthen the global semiconductor supply chain and reduce potential geopolitical risks. Ongoing cross-strait tensions between Taiwan and the People’s Republic of China have also encouraged the company to diversify its manufacturing operations across multiple countries.

The Role of TSMC in Technological Progress

Bell Labs launched the electronic age with the invention of the transistor. Fairchild Semiconductor laid the foundation for Silicon Valley. Intel popularized the microprocessor, while ASML enabled advanced lithography technologies. TSMC, in turn, transformed semiconductor manufacturing into an independent specialized industry, becoming one of the most critical companies of the digital era. Today, much of the technological revolution—from artificial intelligence to smartphones—is powered by TSMC’s manufacturing capabilities.

Today, the ability of Apple, NVIDIA, AMD, Qualcomm, and hundreds of other technology companies to innovate depends largely on the manufacturing infrastructure provided by TSMC. The company does far more than manufacture chips—it serves as one of the foundational institutions enabling the continued growth of the global technology ecosystem.

Conclusion

Founded in 1987 through the vision of Morris Chang, TSMC introduced an innovative solution to one of the semiconductor industry’s greatest challenges: the enormous cost of chip manufacturing. Backed by the strategic support of the Taiwanese government, Philips’ technological partnership, and approximately US$100 million in initial capital, the company evolved into the world’s largest independent semiconductor foundry. Established with roughly US$100 million in startup capital in 1987, TSMC has since grown into one of the world’s most valuable technology companies, with a market capitalization of approximately US$2.1 trillion. Today, it is the world’s leading independent semiconductor foundry, manufacturing the most advanced microchips for Apple, NVIDIA, AMD, Qualcomm, and many other global technology companies.

TSMC founder Morris Chang retired in 2018. In 2024, Dr. C. C. Wei assumed the roles of Chairman of the Board and Chief Executive Officer, continuing the company’s leadership into the next generation.

From the perspective of technology history, TSMC is far more than a successful company. It fundamentally transformed the semiconductor industry’s business model and accelerated the development of the digital age. Morris Chang’s vision has played a decisive role in enabling the technologies used by billions of people today, making TSMC one of the world’s most strategically important technology companies.

References

• Chang, M. (1998). A Foundry’s Vision. Taiwan Semiconductor Manufacturing Company.
• Grove, A. S. (1996). Only the Paranoid Survive. Currency Doubleday.
• Miller, C. (2022). Chip War: The Fight for the World’s Most Critical Technology. Scribner.
• Morris Chang. (2018). Remarks at the TSMC Retirement Ceremony.
• Taiwan Semiconductor Manufacturing Company. Annual Reports.
• Taiwan Semiconductor Manufacturing Company. Corporate Overview.

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