TSMC is founded

TSMC is founded

“In 1987 Morris Chang founded TSMC in Taiwan to make chips only to other companies' designs; by sparing designers the cost of a factory, it made 'fabless' firms like Nvidia possible.”

On 21 February 1987 a new kind of chip company was registered in Taiwan: the Taiwan Semiconductor Manufacturing Company, TSMC. It would make chips only to other companies' designs and never sell chips of its own, a 'pure-play foundry'. Until then almost every chipmaker designed, built and sold its own products. TSMC was a joint venture: the Development Fund of Taiwan's cabinet, the Executive Yuan, held 48.3 percent, the Dutch electronics group Philips 27.5 percent, and nine Taiwanese companies the rest. It started small, in a six-inch wafer factory leased from the government's Industrial Technology Research Institute (ITRI) at Chutung, near Hsinchu.

The idea came from Morris Chang. Born in Ningbo, China, in 1931 and trained at MIT and Stanford, he had spent 25 years at Texas Instruments, where he ran its worldwide semiconductor business, before a short time as president of General Instrument. In August 1985, at 54, he moved to Taiwan to lead ITRI. Within weeks K. T. Li, a cabinet minister without portfolio, asked him for a plan for a semiconductor company. Chang later explained his reasoning: Taiwan had almost no strength in chip design, marketing or patents, and only a possible strength in careful manufacturing. A company that only manufactured could use that strength and avoid the weaknesses. Few people liked the plan; Chang later called Philips 'the only willing significant investor'.

The first years were hard. Fabless companies, which design chips but own no factory, hardly existed yet, so TSMC lived on spare orders from big firms such as Intel, Texas Instruments and Motorola, and it lost money in 1987 and again in 1990. Chang had bet that many engineers wanted to start chip companies but could not raise the huge sums a factory costs. From about 1991 such companies multiplied, and TSMC grew with them: a second factory in the Hsinchu Science Park in 1990, its first eight-inch factory in 1995, a listing on the Taiwan Stock Exchange on 5 September 1994 and on the New York Stock Exchange on 8 October 1997. In 1998 its sales reached NT$50 billion with a profit of NT$15 billion.

Nvidia shows how the model worked. Founded in 1993, it never owned a factory. Jensen Huang met Chang in 1997; in March 1998 Nvidia told the SEC that TSMC had just started making its chips, and its stock-market prospectus of 22 January 1999 called TSMC its 'primary manufacturer'. Chang's plan had created its own customers.

TSMC's founding split the chip industry in two: companies that design and companies that manufacture. Apple, Nvidia and AMD later became its largest customers, and TSMC became the world's biggest foundry. Because so many of the most advanced chips are made in Taiwan, the company now matters to the AI boom and to the politics around the island as much as to the markets.

What happened

  1. 1985

  2. Morris Chang, 54, formerly head of Texas Instruments' worldwide chip business and briefly president of General Instrument, takes office as president of the Industrial Technology Research Institute (ITRI) at Chutung, offered the post by Premier Yu Kuo-hwa. Within weeks K. T. Li, minister without portfolio, asks him for a plan for a semiconductor company and a presentation within days; Chang proposes a foundry that makes chips only for others.

    ITRI's Chung Hsing campus, 195 Chung-Hsing Road Section 4, Chutung (Zhudong): Chang's institute from 1985, and TSMC's first home, with Fab 1 and its offices in Building 67
  3. 1986

    The money is raised. The Development Fund of the Executive Yuan takes 48.3 percent, Philips 27.5 percent, in return for cash, its process technology and patent licences, and nine Taiwanese companies 24.2 percent. Chang later calls Philips 'the only willing significant investor'.

    The Executive Yuan, Taipei: Taiwan's cabinet, whose Development Fund put up 48.3 percent of TSMC's capital
  4. 1987

  5. Production starts in Fab 1, a six-inch fab leased from the Ministry of Economic Affairs and ITRI on the Chutung campus, with 3.0- and 2.5-micron processes, by Chang's account two and a half generations behind the leading edge. Customers at first are big chipmakers with spare orders; the first year ends with a loss.

    ITRI's Chung Hsing campus, 195 Chung-Hsing Road Section 4, Chutung (Zhudong): Chang's institute from 1985, and TSMC's first home, with Fab 1 and its offices in Building 67

  6. A technical cooperation agreement with ITRI takes effect for five years: ITRI licenses its technology for making MOS silicon wafers, and the Ministry of Economic Affairs gets an option on up to 35 percent of the new company's capacity.

    ITRI's Chung Hsing campus, 195 Chung-Hsing Road Section 4, Chutung (Zhudong): Chang's institute from 1985, and TSMC's first home, with Fab 1 and its offices in Building 67

  7. Taiwan Semiconductor Manufacturing Company is incorporated, with paid-in capital of NT$1.3775 billion and Chang as chairman. Its charter forbids it to design or sell chips of its own.

    ITRI's Chung Hsing campus, 195 Chung-Hsing Road Section 4, Chutung (Zhudong): Chang's institute from 1985, and TSMC's first home, with Fab 1 and its offices in Building 67
  8. 1988

  9. TSMC North America opens in San Jose, California, to win customers in Silicon Valley; revenue for the year is NT$924 million (about 35 million dollars).

  10. Construction of Fab 2, TSMC's own first plant, begins in the Hsinchu Science Park.

    Hsinchu Science Park, where TSMC built Fab 2 from 1988 and every fab after it in the founding years
  11. 1989

    Revenue doubles to NT$1.85 billion (about 70 million dollars), with a profit; TSMC Europe opens in Amsterdam.

  12. 1990

  13. TSMC agrees to make DRAM memory chips for Intel to sell in Taiwan and Asia (the deal ends in 1991). The year ends with a net loss, the company's second and, in Chang's words of 2007, its last.

  14. TSMC dedicates Fab 2 at 121 Park Avenue 3 in the Hsinchu Science Park, the first fab in the world designed from the ground up for SMIF, sealed 'mini-environment' boxes around the wafers, built for 40,000 six-inch wafers a month. Former premiers Yu Kuo-hwa and Sun Yun-suan and K. T. Li come to the completion ceremony, which Chang's own photograph dates to February 1990.

    121 Park Avenue 3, Hsinchu Science Park: TSMC's Fab 2 (dedicated 28 April 1990) and Fab 5 (1997), and the company's address in 1991
  15. 1991

    Fabless chip companies begin to multiply and TSMC's growth takes off; Chang dates the turn to about 1991-92 and says the company has not lost money in any year since.

  16. 1993

    TSMC becomes the first Taiwanese chipmaker certified to ISO 9001 and starts building Fab 3, its first eight-inch fab. Chips designed in California, such as Trident Microsystems' graphics controllers, carry the mark 'TSMC TAIWAN'.

  17. 1994

  18. With the Ministry of Economic Affairs and other investors TSMC sets up Vanguard International Semiconductor, a DRAM maker; Chang leaves the chair of ITRI.

  19. TSMC's shares are listed on the Taiwan Stock Exchange; Chang later put its market value then at about 4 billion dollars.

  20. 1995

    Fab 3 starts production, the company's first eight-inch fab, and TSMC makes more than a million six-inch wafers in a year for the first time.

  21. 1996

    TSMC states its aim to be each customer's 'Virtual Fab': to give a company without a factory all the benefits of owning one.

  22. 1997

  23. Fab 5 begins production at 121 Park Avenue 3, beside Fab 2.

    121 Park Avenue 3, Hsinchu Science Park: TSMC's Fab 2 (dedicated 28 April 1990) and Fab 5 (1997), and the company's address in 1991

  24. Jensen Huang, whose four-year-old Nvidia has about 100 people and 27 million dollars of revenue, meets Chang, who visits to hear how many wafers Nvidia will need; in Huang's telling, Nvidia starts working with TSMC the next year.

  25. TSMC's American depositary shares begin trading on the New York Stock Exchange; Philips sells 24 million of them in the offering. Chang later counted the listing day among the proudest of his life and put the company's value at about 6 billion dollars.

    The New York Stock Exchange, 11 Wall Street: TSMC's ADSs listed here on 8 October 1997
  26. 1998

  27. WaferTech in Camas, Washington, a fab TSMC owns jointly with long-standing customers, begins volume production in mid-1998; for the year TSMC earns NT$15.34 billion on sales of NT$50.23 billion in a falling chip market.

    WaferTech, Camas, Washington (today TSMC Washington): TSMC's joint-venture fab with customers in the United States, in volume production from mid-1998

  28. Business Week names Chang one of its 'Top 25 Managers of the Year'.

  29. Nvidia files to go public and tells the SEC it has 'recently established a relationship with TSMC as a second semiconductor manufacturer', which has begun making its RIVA128ZX; Nvidia starts shipping the 128ZX that month.

  30. Nvidia begins shipping the RIVA TNT, made by TSMC, after yield troubles at TSMC with the 128ZX in the quarter to 26 July.

  31. TSMC announces a joint-venture fab in Singapore with Philips Semiconductors and EDB Investments (SSMC).

  32. 1999

  33. Nvidia sells 3.5 million shares at 12 dollars in its public offering; its prospectus names TSMC 'the Company's primary manufacturer' and says the company owns no fab at all, the model Chang had bet on in 1985.