TAIPEI (Taiwan News) — The amount of attention that Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) receives in international media is a testament to its critical importance to the world’s supply chains. The company continued making headlines in November when Warren Buffet’s investment firm, Berkshire Hathaway, made a substantial investment in the company.
A week after the news broke, Tim Koay, a tech historian, joined the Startup Island Taiwan podcast with host Jon Y from the Asionametry YouTube channel. On the podcast, broadcast Nov. 25, Koay discussed a bit of the history behind Taiwan’s TSMC and Taiwan's semiconductor industry.
Koay is a researcher and has devoted much of his time to researching the origins and historical development of TSMC, the world’s largest chip manufacturer. On the podcast, Koay says he hopes his research will one day be published as a history on the topic.
TSMC was founded in 1987, by Morris Chang (張忠謀), in cooperation with the government-funded Industrial Technology Research Institute (ITRI) based in Hsinchu. However, the history of semiconductor production in Taiwan stretches back to the early 1970s.
In his research, Koay identifies three distinct time periods for Taiwan’s semiconductor industry. First, there was a period when the industry was entirely government-funded and directed. This was followed by a period of government-supported private development, starting with UMC's founding by Robert Tsao (曹興誠).
For almost a decade, UMC was “the only player in town,” as Koay says. Then in 1987, Morris Chang was recruited from a government research position to found TSMC as an entirely private enterprise. Due to beneficial circumstances related to its founding, TSMC became a success very quickly, and went fully public in the early 1990s.
The origin story of Taiwan's semiconductor manufacturing begins in the late 1970s, under the government of Chiang Ching-kuo (蔣經國). At the time, Taiwan's government was worried that its previously successful industries had reached a plateau, and the country was looking to explore options to invest in newer high-tech industries, says Koay.
The idea to invest in chip production was suggested by Pan Wen-yuan (潘文淵), an electric engineer educated in the U.S. According to Koay, the initial aim of the investment was for the production of electronic watches.
The Startup Island podcast episode is entitled “TSMC and Taiwan's semiconductor industry, all started 40 years ago at a soy milk restaurant.” The title refers to a famous meeting that took place over breakfast on Feb. 7, 1974, in which Pan told then Minister of Economic Affairs Sun Yun-suan (孫運璿) that the new industry would require a minimum startup investment of US$10 million.
The story goes that Sun agreed without hesitation and the government went about organizing a research and development organization that would lay the groundwork for Taiwan's first fab. This was ITRI, which absorbed the Electronic Research center under the Ministry of Transportation and some of the government's Materials Research Laboratories.
According to Koay's research, even in the early stages, government officials wanted to privatize the industry. He says that at the time, they recognized the successful models of many U.S. tech companies, and were also aware of the limits of state-run industries.
After the government gave the green light, a team of engineers was sent to various fabs in the U.S., particularly an RCA fab in Ohio, where the engineers learned the fundamentals of chip production. Meanwhile, in Taiwan, ITRI was busy building the foundations of the country’s first fab in Hsinchu.
The groundbreaking ceremony for ITRI's fab in 1974. Pan Wen-yuan is center-right. (ITRI photo)
Things were up and running in 1978, and within a few years, its production had already surpassed average production at an RCA fab in the U.S. According to Koay, the earliest contracts signed by the fab in Hsinchu were for some small budget projects for the military. However, the first major clients were several companies in Hong Kong and Japan, that were producing electronic watches.
For a strong history lesson full of interesting anecdotes relating to the early history of Taiwan’s semiconductor industry, be sure to listen to the podcast episode on the player above, or on the Startup Island Taiwan podcast's homepage on First Story.
