Taiwan Semiconductor: Everything You Need To Know

Key Points

• Taiwan Semiconductor Manufacturing Company, or TSMC, is a large chip manufacturing company.
• The Taiwanese Government founded the company in 1987 under the direction of Morris Chang. Taiwan saw the growing technology industry as an opportunity to create semiconductors.
• TSMC is a manufacturing facility for chips used in laptops, desktops, televisions, and remote controllers. TSMC supplies around 51% of chips to companies worldwide.

The History of Taiwan Semiconductor Manufacturing Company: What to Know

Taiwan Semiconductor Manufacturing Company, or TSMC, is one of the most influential computer chip manufacturers in the world. TSMC holds such a large percentage of global chip fabrication that it is often considered to be a lesser-known company that runs the world.

The company was founded by the Taiwanese Government in 1987 under the direction of Morris Chang. Taiwan saw the growing technology industry as an opportunity to create the semiconductors the growing industry required.

During the early years of wafer fabrication for microchip production, TSMC supplied all of the computer component competitors on the market, from AMD and NVIDIA to IBM and Intel. Morris Chang directed the company to sell the first chips at a higher rate to grow trust in the quality of their product and to gain early profit for faster company growth. The tactic proved to be wise as the growing profits allowed TSMC to further the process of wafer fabrication to the point that any new company would need a $100 billion budget to attempt to compete.

Today, TSMC’s main competitor is Samsung. However, Samsung is way behind TSMC when it comes to market share. TSMC supplies 92% of the global market, while Samsung is responsible for the remaining 8%.

In 2020, Taiwan was hit hard by the response to the global pandemic. Business ground to a halt which in turn caused a massive chip shortage and slowed the shipping process. In response to this, TSMC was urged to expand its fabrication to other locations like the United States and Japan to help alleviate the effects of global market changes.

By 2024, TSMC will officially operate in the US, Japan, Taiwan, and China, with other locations under consideration.

The Founding of Taiwan Semiconductor Manufacturing Company: How It Happened

In 1985, Morris Chang was recruited to develop the semiconductor industry for the Taiwanese government. In 1986, he joined a non-profit research institute in Hsinchu, Industrial Technology Research Institute, as Chairman and President. It was on the ITRI campus that Morris Chang launched the creation of what later became TSMC’s first semiconductor wafer fabrication plant.

In only a year, the fabrication plant drew the attention of multinational investors. The Taiwan government formed the Taiwan Semiconductor Manufacturing Company as a joint venture with Philips and other private investors.

TSMC Through The Decades

1985-1995

In 1985, the Taiwanese government tasked Morris Chang with developing the emerging semiconductor industry for Taiwan. By 1987, the wafer fabrication center in Hsinchu, Taiwan, became TSMC’s first official fab location.

Before TSMC’s open-access foundry, the concept of a dedicated foundry that produced microchips for other semiconductor companies was novel. Competitors had attempted to keep their innovations in-house and locked away from ‘prying’ eyes. However, TSMC’s novel concept proved to be the stronger route for technology innovation and global cooperation.

The company began to expand operations vertically by gradually expanding into related disciplines such as wafer sort testing in 1988, mask-making in 1990, and design services using VLSI-licensed technology in 1991. Although TSMC started two-node processes behind its competitors at the time, it was able to break the 1-micron wafer-processing barrier in 1991, replacing its six-inch, 2-micron wafer-processing fabrication.

By 1992, TSMC was rated as the world’s top silicon foundry. It employed 250 process engineers and lead the way in cutting-edge process technology. Revenue was already near $245 million.

In September 1994, TSMC went public on the Taiwan Stock Exchange. The growth in stock investment allowed the company to make a new partnership with Advanced Micro Devices (AMD) as the company’s foundry for the AM486 processors. The partnership grew interested in other fabless semiconductor companies. The business growth rose TSMC’s sales by nearly 60 percent. The company reported $744 million in sales with $325 million as net income.

Taiwan Semiconductor Manufacturing Company’s wild success lead to the company’s expansion. In March 1995, TSMC announced the launch of an eight-inch wafer fabrication plant that would cost them $1.2 billion. By November, construction had begun. In the same month, TSMC and Altera Corporation announced another joint venture to build wafer fabrication plants at Camas, Washington for another $1.2 billion. The Washington plant was designed to produce 30,000 eight-inch wafers per month and took the name WafterTech.

Before the end of 1995, TSMC announced the construction of Fab 5 in Hsinchu, Taiwan.

1996-1999

In April 1996, TSMC was listed on the New York Stock Exchange as the first Taiwanese company to do so. By the end of 1996, TSMC reported $1.45 billion in sales with a net income of $718 million. The incredible sales success of the company led to dividend payouts to employees valued at more than $100,000 each.

TSMC earned a reputation for caring for its employees even as the semiconductor industry experienced a downturn in business. Aside from the generous dividends, TSMC also transferred nearly 100 million shares of stock to over 4,000 employees who worked for the company in 1996.

1997 was foreseen to be the year of sales decline with a 50% drop in profits. TMSC had created an excess supply of wafers for microchips, and the semiconductor industry competitors were getting stronger. United Microelectronics Corporation (UMC) of Taiwan had taken the lead position against their long-time competitor Chartered Semiconductor Manufacturing Pte. Ltd. Of Singapore. UMC became TSMC’s primary rival by forming three independent foundry ventures in partnership with North American design houses. At the same time, UMC set aggressive price cuts to undersell TSMC.

In March of 1997, TSMC Chairman Morris Chang took Donald Brooks’ position of TSMC President. Brooks joined UMC as president of a new International Operation based in Sunnyvale, California.

With Morris Chang at the helm, TSMC saw growth in the face of fierce competition for market share. As a founder of the company, Chang had experience in keeping the advancement of the company’s process at the forefront. The stock value, product strength, and professional reputation kept TSMC from seeing a massive loss on the stock market and growth in market share.

1998 was predicted to be another downturn for the semiconductor industry. TSMC, on the other hand, had fully booked the first quarter and even announced an increase in wafer production by 40 percent. The company even announced plans to begin the construction of several more fabrication plants.

In September 1999, Taiwan was hit by the largest earthquake in the country’s history. The country suffered a power loss that was corrected within a week. TSMC was able to keep nearly all fabrication plants fully operational and reached 90% capacity just after the recovery.

With a few years of turmoil behind it, TSMC named a new president, F.C. Tseng. With Tseng as the new president, TSMC announced a plan to offer a copper-metallization process and a switch to 0.18-micron process wafer-fabrication technology.

2000-2002

In January of 2000, TSMC completed the acquisition of TSMC-Acer for around $90 million. In the same month, the company acquired Taiwan’s third-largest foundry, WSMC. With the purchase of both foundries, TSMC is estimated to increase wafer production from 2.8 million units to 3.4 million units by the end of the first year.

With an increased budget and fabrication force, TSMC entered 2001 with a surplus of wafers and less demand. The company decided to cut the spending budget and lower production by 40% capacity. The company’s biggest competitor, UMC, followed suit as demand had truly gone down.

Luckily, demand for semiconductors returned in full force by the end of the year. 2002 was marked as a year for the company once again to see forward momentum.

2003-2019

The 2000s and 2010s were a few decades of amazing business for TSMC. Production trucked along with the supply and demand seemed to be perfectly matched. Innovation was made across the computing industry in other interesting ways.

2020-2021

As a quiet giant in the tech industry, TSMC held a strong position in the stock exchange and the majority of the market share for semiconductors. With the added production rate of the company’s subsidiaries and the standard of quality in the company’s process, TSMC is a force that is nearly impossible to stand up against. No other time did this become more apparent than during the pandemic of 2020.

As government pressure caused a wild stir in how to handle the situation, many companies were forced to bring production down to a standstill. The supply fabricated by TSMC covers around 90% of the semiconductor market. Without the units to fill the demand, consumer electronics could not be made. AMD, Nvidia, Apple, Sony, Microsoft, and a plethora of tech companies that rely on a supply of microchips suffered from the cut to production.

To avert the chip shortage, American companies like Apple urged TSMC to bring fabrication plants closer to their operations. A plan was introduced to build a wafer-fabrication plant outside of Pheonix, Arizona.

While the chip shortage may put TSMC in financial danger, it does not. The company has now shown the world its significance and value. If anything, TSMC is sure to see a rise in stock value as the world continues to recover.

How Does TMSC Make Money?

TSMC is a manufacturing facility for chips used in everyday products, from laptops and desktops to televisions and remote controllers. Nearly every modern product has a chip inside it. Taiwan Semiconductor Manufacturing Company supplies around 51% of those chips to other companies worldwide. Alongside Samsung, TSMC is one of only two companies producing 5 nm chips.

Companies like Apple, Microsoft, Asus, Yamaha, Panasonic, and nearly every tech business in the world is on the list of TSMC’s customers.

TSMC Acquisitions

WaferTech

In collaboration with Altera Corporation, TSMC signed onto a joint venture named Analog Devices and Integrated Silicon Solutions. Halfway through 1996, TSMC signed on two more venture partners and renamed the plant WaferTech. WaferTech was established in Camas, Washington.

TSMC-Acer

As TSMC increased the capacity of its fabrication plants, it sought out another way to increase unit production. The company employed the age-old method of the buyout. TSMC already owned a 30% stock share of TSMC-Acer but decided to complete the acquisition with a $90 million buyout in January of 2000, making it the first of TSMC’s subsidiaries.

WSMC

Alongside the Acer purchase, TSMC sought to buy the third-largest semiconductor foundry in Taiwan, WSMC. With both companies under its wing, TSMC predicted a 40% increase in wafer fabrication which brought the company from 2.8 million wafers to 3.4 million wafers produced in the same year. With both TSMC-Acer and WSMC as subsidiaries, TSMC was poised to seize an upward growth trend.

TSMC Notable Controversies

Chip Shortage

During the height of the pandemic of 2020, chip manufacturing and product shipping were ground to a near halt. In turn, the supply of microchips for the wide array of products the world now enjoys went dry. That meant there was a heavy shortage of computers, processors, graphics cards, video game consoles, smartphones, laptops, and just about everything else that’s considered a part of the Internet of Things.

TSMC and Samsung are the only manufacturing companies to produce 5 nm architecture chips reliably. Which just happens to make them incredibly valuable for everyone else. As the shortage continued through 2021, it became apparent that the world could not continue to rely on the supply of the chips needed to be produced in one place. TSMC put together a plan to build a fabrication plant outside of Pheonix, Arizona. It should be operational by 2024 and produce nearly 20,000 wafers a month.

With the expansion of TMSC fabrication facilities, TSMC hopes to fix the chip shortage and prevent it from happening again. American tech companies like Apple are happy with the move as it adds stability to the production of Apple’s computers and iPhones. Like the struggles of the company’s founder had been overcome, TSMC’s current leadership is set to overcome the turmoil caused by 2020.

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