This appeared last week
Morris Chang turned 55. Then he started the world’s most important company
By Ben Cohen
The Wall Street Journal
1:24AM March 31, 2024
The world’s most valuable tech companies were founded in dorm rooms, garages and diners by entrepreneurs who were remarkably young. Bill Gates was 19. Steve Jobs was 21. Jeff Bezos and Jensen Huang were 30.
But what might just be the world’s most invaluable company was founded by Morris Chang when he was 55 years old.
Never has anyone so old created a business worth so much as Taiwan Semiconductor Manufacturing Company, known simply as TSMC, the chip manufacturer that produces essential parts for computers, phones, cars, artificial-intelligence systems and many of the devices that have become part of our daily lives.
Mr Chang had such a long career in the chip business that he would have been a legend of his field even if he’d retired in 1985 and played bridge for the rest of his life. Instead he reinvented himself. Then he revolutionised his industry.
But he wasn’t successful despite his age. He was successful because of his age. As it turns out, older entrepreneurs are both more common and more productive than younger founders. And nobody personifies the surprising benefits of mid-life entrepreneurship better than Mr Chang, who had worked in the US for three decades when he moved to Taiwan with a singular obsession.
“I wanted to build a great semiconductor company,” he told me.
What he built was unlike any existing semiconductor company. You probably use a device with a chip made by TSMC every day, but TSMC does not actually design or market those chips.
That would have sounded completely absurd before the existence of TSMC. Back then, companies designed chips that they manufactured themselves.
Mr Chang’s radical idea for a great semiconductor company was one that would exclusively manufacture chips that its customers designed. By not designing or selling its own chips, TSMC never competed with its own clients. In exchange, they wouldn’t have to bother running their own fabrication plants, or fabs, the expensive and dizzyingly sophisticated facilities where circuits are carved on silicon wafers.
The innovative business model behind his chip foundry would transform the industry and make TSMC indispensable to the global economy.
Now it’s the company that Americans rely on the most but know the least about. Morris Chang isn’t a household name, either, but he should be.
TSMC’s founder shaped the chip business over the past 70 years and still finds himself playing an important role today. His longevity puts him right at the top of the list of the people most responsible for cultivating the world’s most vital technology.
“Hardly anyone has been more influential,” says Chris Miller, the author of the book Chip War
I recently spoke with Mr Chang by video chat to find out what others can learn from his adventures as a middle-aged entrepreneur and why it’s never too late to try something new.
As the demand for chips intensifies and US-China relations deteriorate, the world increasingly depends on TSMC, and there are lots of questions about the future of this company that Mr Chang founded on a geopolitically vulnerable island. But the topic of our conversation was TSMC’s past.
Mr Chang, now 92, officially retired as TSMC’s chairman in 2018, but the white-haired pioneer was sitting at his desk in a suit and tie as he sipped from a glass of Diet Coke during our 90-minute interview.
I wanted to know more about his decision to start a new company when he could have stopped working altogether. What I discovered was that his age was one of his assets. Only someone with his experience and expertise could have possibly executed his plan for TSMC.
“I could not have done it sooner,” he says. “I don’t think anybody could have done it sooner. Because I was the first one.”
Texas, then Taiwan
Long before he moved to Taiwan in middle age, Morris Chang moved to the US as a teenager.
Mr Chang was born in mainland China and had a peripatetic childhood as his family bounced around the war-torn country. When he fled to the US in 1949, America felt to him like paradise. He later became a US citizen.
Mr Chang grew up dreaming of being a writer — a novelist, maybe a journalist — and he planned to major in English literature at Harvard University. But after his freshman year, he decided that what he actually wanted was a good job.
He transferred to the Massachusetts Institute of Technology, where he studied mechanical engineering, earned his master’s degree and would have stayed for his PhD if he hadn’t failed the qualifying exam. Instead, he got his first job in semiconductors and moved to Texas Instruments in 1958.
Back then, chips were known as things made from potatoes. But he came along as the integrated circuit was being invented, and his timing couldn’t have been any better, as Mr Chang belonged to the first generation of semiconductor geeks. He developed a reputation as a tenacious manager who could wring every possible improvement out of production lines, which put his career on the fast track.
Three years after he moved to Dallas, the company sent him to Stanford University for his PhD in electrical engineering. This time, he aced the qualifying exam and returned as Dr Chang. By the late 1960s, he was managing TI’s integrated-circuit division. Before long, he was running the entire semiconductor group.
Mr Chang was such a workaholic that he made sales calls on his honeymoon and had no patience for those who didn’t share his drive. These days, TSMC is investing $US40 billion ($61.3bn) to build plants in Arizona, but the project has been stymied by delays, setbacks and labour shortages, and Mr Chang told me that some of TSMC’s young employees in the US have attitudes toward work that he struggles to understand.
“They talk about life-work balance,” he says. “That’s a term I didn’t even know when I was their age. Work-life balance. When I was their age, if there was no work, there was no life.”
Mr Chang climbed the executive ranks at TI, but he was passed over for top jobs and felt like he was being put out to pasture. He wanted TI to focus on semiconductors, but the company wanted to keep selling consumer products.
“Home computers and all that stuff,” he says. “That was a serious distraction and a serious diversion of corporate resources.” In 1983, once he accepted that he wouldn’t be promoted, and his company wasn’t going to bet on a market that he believed was the future, he quit Texas Instruments.
Almost immediately, he was hired by electronics manufacturer General Instrument as president and chief operating officer. Almost immediately, he realised that he’d made a huge mistake. “I was a mismatch — a complete misfit,” Mr Chang says. After one year, he quit General Instrument, too.
Now he was turning 54 and had no clue what he was going to do next. He knew he wanted to work again and had venture-capital offers that he might have accepted if Taiwan hadn’t beckoned. But he could afford to wait for a better opportunity.
Mr Chang says he wouldn’t have taken the risk of moving to Taiwan if he weren’t financially secure. In fact, he didn’t take that same risk the first time he could have.
In 1982, Mr Chang received a tempting job offer from a powerful Taiwanese official named K.T. Li, the man credited with orchestrating the country’s postwar economic development and galvanising the nation’s tech industry. He wanted Mr Chang to be the president of Taiwan’s leading tech institute and spin research into profit.
By then, Mr Chang knew that he wasn’t long for Texas Instruments. But his stock options hadn’t vested, so he turned down the invitation to Taiwan. “I was not financially secure yet,” he says.
“I was never after great wealth. I was only after financial security.” For this corporate executive in the middle of the 1980s, financial security equated to $US200,000 a year. “After tax, of course,” he says.
Mr Chang’s situation had changed by the time Mr Li called again three years later. He’d exercised a few million dollars of stock options and bought tax-exempt municipal bonds that paid enough for him to be financially secure by his living standards. Once he’d achieved that goal, he was ready to pursue another one.
He calls moving to Taiwan his “rendezvous with destiny,” but the truth is that nothing about TSMC was destined.
“There was no certainty at all that Taiwan would give me the chance to build a great semiconductor company, but the possibility existed, and it was the only possibility for me,” Chang says. “That’s why I went to Taiwan.”
He had spent most of his career in Texas and thought he would retire in the US after 15 years in Taiwan. That was almost 40 years ago.
When older is better
Is Morris Chang an outlier?
Not long ago, a team of economists investigated whether older entrepreneurs are more successful than younger ones. By scrutinising Census Bureau records and freshly available Internal Revenue Service data, they were able to identify 2.7 million founders in the US who started companies between 2007 and 2014. Then they looked at their ages.
The average age of those entrepreneurs at the founding of their companies was 41.9. For the fastest-growing companies, that number was 45. The economists also determined that 50-year-old founders were almost twice as likely to achieve major success as 30-year-old founders, while the founders with the lowest chance of success were the ones in their early 20s. Every shred of evidence led them to a counterintuitive takeaway.
“Successful entrepreneurs are middle-aged, not young,” they wrote in their 2020 paper.
This is not the image of startup founders that most people have in their minds. They are more likely to think of Steve Jobs tinkering in a garage or Mark Zuckerberg coding in his dorm room. Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta Platforms had founders who were 30 or younger, and Silicon Valley’s venture capitalists throw money at talented young entrepreneurs in the hopes they will start the next trillion-dollar company.
They have plentiful energy, insatiable ambition and the vision to peek around corners and see the future. What they don’t typically have are mortgages, family obligations and other adult responsibilities to distract them or diminish their appetite for risk. Mr Chang himself says that younger people are more innovative when it comes to science and technical subjects.
But in business, older is better. Entrepreneurs in their 40s and 50s may not have the exuberance to believe they will change the world, but they have the experience to know how they actually can.
Some need years of specialised training before they can start a company. In biotechnology, for example, founders are more likely to be college professors than college dropouts. Others require the lessons and connections they accumulate over the course of their careers.
“There are ideas that you can only have once you’ve been around and you’ve had a real job,” said MIT Sloan School of Management professor Pierre Azoulay, one of the paper’s authors. “Those are not typically challenges solved by twenty-somethings, because you need to be up close and personal with the problems of a corporate customer to imagine a solution.”
There was one more finding from their study of US companies that helps explain the success of a chip maker in Taiwan. It was that prior employment in the area of their startups — both the general sector and specific industry — predicted “a vastly higher probability” of success.
“The closer the industry match,” they wrote, “the greater the success rate.”
The founding of a foundry
Morris Chang had 30 years of experience in his industry when he decided to uproot his life and move to another continent. He knew more about semiconductors than just about anyone on earth — and certainly more than anyone in Taiwan. As soon as he started his job at the Industrial Technology Research Institute, Chang was summoned to K.T. Li’s office and given a second job.
“He felt I should start a semiconductor company in Taiwan,” Mr Chang says. “So that was the start of TSMC.”
When he sat down to figure out what TSMC’s business model should be, Mr Chang started by recognising what it couldn’t be.
“I decided right away that this could not be the kind of great company that I wanted to build at either Texas Instruments or General Instrument,” he says.
TI handled every part of chip production, but what worked in Texas would not translate to Taiwan. The only way that he could build a great company in his new home was to make a new sort of company altogether, one with a business model that would exploit the country’s strengths and mitigate its many weaknesses.
Mr Chang determined that Taiwan had precisely one strength in the chip supply chain. The research firm that he was now running had been experimenting with semiconductors for the previous 10 years. When he studied that decade of data, Mr Chang was pleasantly surprised by Taiwan’s yields, the percentage of working chips on silicon wafers. They were almost twice as high in Taiwan as they were in the US, he said.
Mr Chang knew his company wouldn’t have the resources to compete with Silicon Valley when it came to designing, selling or marketing chips. But he believed there was one potential competitive advantage for the company that would become TSMC: manufacturing chips — and only manufacturing chips.
The seeds of a pure chip foundry had been planted in his mind by Gordon Campbell, a semiconductor entrepreneur who visited Mr Chang during his otherwise regrettable year at General Instrument.
Chipmaker TSMC formally opened its first Japanese plant on Saturday (February 24), highlighting the Taiwanese…
Mr Campbell was familiar with the agonies and the inefficiencies of building and operating a fab. He felt startups were better off designing chips and outsourcing the manufacturing. To some in his business, this was unthinkable. “Real men have fabs,” the famous saying went. One man thought the future was fabless.
“People were ingrained in thinking the secret sauce of a successful semiconductor company was in the wafer fab,” Mr Campbell told me. “The transition to the fabless semiconductor model was actually pretty obvious when you thought about it. But it was so against the prevailing wisdom that many people didn’t think about it.”
He was thinking about it when he spoke with Mr Chang in late 1984. And soon Mr Chang was thinking about it, too. He began to think that every fabless company would need a foundry.
Taiwan’s government took a 48 per cent stake, with the rest of the funding coming from the Dutch electronics giant Philips and Taiwan’s private sector, but Mr Chang was the driving force behind the company. The insight to build TSMC around such an unconventional business model was born from his experience, contacts and expertise. He understood his industry deeply enough to disrupt it.
“TSMC was a business-model innovation,” Mr Chang says. “For innovations of that kind, I think people of a more advanced age are perhaps even more capable than people of a younger age.”
Mr Chang says the idea behind TSMC was also the result of the personal philosophy that he’d developed over the course of his long career. “To be a partner to our customers,” he says. That founding principle from 1987 is the bedrock of the foundry business to this day, as TSMC says the key to its success has always been enabling the success of its customers.
More here:
https://www.theaustralian.com.au/business/the-wall-street-journal/morris-chang-turned-55-then-he-started-the-worlds-most-important-company/news-story/9b1de69660a81bcbfd4b87673dfabce9
What a great story showing you are never to old to become an ‘overnight success’!
David.
