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How TSMC went global? A firsthand account from Mark Liu

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How TSMC Went Global? A Firsthand Account from Mark Liu (Courtesy of TSMC) How TSMC went global? A firsthand account from Mark Liu
How TSMC Went Global? A Firsthand Account from Mark Liu (Courtesy of TSMC)

TAIPEI (Business Today/TVBS News) — Standing about ten meters away at the conference room's door, Mark Liu (劉德音), waves to the visiting team from Business Today. He is the chairman of Taiwan Semiconductor Manufacturing Company (TSMC), the leader of the largest market value enterprise across the Taiwan Strait, Hong Kong, and Macao, and a focal point of global attention in the technology industry.

Last year, TSMC's revenue reached NT$2.16 trillion, an increase of over 109% since he took over as chairman in 2018; last year, TSMC's earnings per share exceeded 32, a growth of over 138% from six years ago; and now, TSMC's market value of NT$22.49 trillion is 2.79 times what it was six years ago.

 

However, during an 80-minute interview, Liu did not dwell on the numerical differences between then and now; when discussing the distinct changes in TSMC over the years, Liu says that TSMC now is not just Taiwan's TSMC, but "the world’s TSMC!"

"If we only remain as 'TSMC of Taiwan,' only being pursued by our own people in Taiwan, wouldn't that be... a lack of progress?" he says with a smile. We took the opportunity to respond, "Chairman, now you are being pursued by the whole world!" Liu calmly stated but with a slightly strained smile, "That... is another problem."

Indeed, the phrase “the world’s TSMC" implies numerous crises and key decisions. Facing the dramatic changes in geopolitics, Liu says, "There was never a 'key moment' in the process," as events piled up one after another, "There was never a simple true or false question; every time, it was a difficult problem to solve." The tricky geopolitical situation also forced TSMC to maintain an absolute lead in process technology, he explains, "We must make TSMC's products 'irresistible' to the whole world, including mainland China."
 

Having been tested by geopolitics, Liu points out that this provided a rare opportunity for all departments of the company to hone their strengths. He further predicts that the future of TSMC would undoubtedly be more exciting.

He waved hands to greet us, inviting us to move forward together to meet the even more splendid TSMC he envisions. And the foundation for this splendor, Liu began with the thrilling geopolitical responses of TSMC over the year. 
Liu is set to retire, making a final appearance at TSMC's annual shareholders' meeting as company chair on June 4. (Courtesy of TSMC)

Discussing Geopolitics: Customers Directly Demand Setting Up a Factory in the U.S.: "You Must Have a 'Presence'"
"There's a book that might not be well-known in Taiwan, called 'All Measures Short of War'... In 2018, the author of that book specifically came to Taipei to see me," Liu recalls softly. It was a meeting arranged by the Taipei Forum Foundation (台北論壇基金會) and introduced by Richard Bush (卜睿哲), the former chairman of the American Institute in Taiwan (AIT).

If translated literally, the title 'All Measures Short of War' basically says that “China and the U.S. have already clashed, but not through direct warfare." The author of the book is Thomas Wright, a senior fellow at the renowned U.S. think tank Brookings Institution. “He came to me, continuously inquiring about our technology and expressing the U.S.'s concerns," Liu says. It was a concern based on "Taiwan controlling most of the semiconductor product manufacturing for the U.S."

American Scholar Knocks on the Door, Setting off Alarm Bells
He recalls that as early as 2015, near the end of former U.S. President Barack Obama's term, the confrontation between the U.S. and China was gradually heating up, "At that time, TSMC was already paying attention to the development of the global situation." However, when this American scholar, who was studying the "U.S.-China confrontation," actively came knocking, it set off alarm bells."Not surprised, but it was indeed a critical awakening, " Liu recalls. He realized that geopolitics would be an important issue for TSMC.

The situation evolved rapidly. Liu reveals that in December 2018, shortly after that meeting, an international client straightforwardly told TSMC, "It would be best if you could come to the U.S., to give TSMC a presence in the U.S."
 

At this point, Liu mentions a famous quote from Morris Chang (張忠謀), the founder of TSMC, in November 2019, "When the world is no longer peaceful, TSMC will become a battleground for geopoliticians." This was a clear reminder, "But at that time, what was the reaction in Taiwan? People were not worried; instead, they were quite happy," Liu couldn't help but smile wryly, "The outside world actually didn't know, a great disaster was coming! Some things, at that time, couldn't be clearly explained to the public."

The description "a great disaster was coming" certainly had a joking element, but when we asked, "Did the founder tell you how to respond to geopolitical changes?" Liu shakes his head thoughtfully and says, "We just…. felt our way forward, going with the flow."

In June 2018, Liu and C.C. Wei (魏哲家) respectively took over as chairman and CEO, officially ushering TSMC into an era of co-governance. In an unprecedentedly rapidly changing business environment, the two began to navigate the situation, laying the foundation for "TSMC of the world" step by step.

Discussing the Great Power Game: "It's Not About Taking Sides, I Just Need to Stand Upright"
In early 2019, TSMC hired a new senior vice president for government relations, Peter Cleveland, who had served as vice president at the semiconductor giant Intel, but what TSMC valued more might have been his experience working in the U.S. Senate. This personnel move revealed the daily changes under geopolitical pressure that Liu faced. He candidly says, "The biggest change, I think, was the relationship with governments... That's when (we started) making phone calls with various governments."
TSMC's U.S. factory in Arizona. (TVBS News)

 
Behind a Personnel Case Lies International Pressure
In June 2019, he went to the U.S. to participate in the SelectUSA Investment Summit organized by the U.S. Department of Commerce. Liu recalls, "Local officials did express some 'concerns,' of course, their purpose was to attract investment." He reveals that he indeed felt the pressure building up gradually, "There was pressure, but you wouldn't show it because you are someone who has to make big decisions." This statement seemed to be a reminder to himself, also hinting at some underlying difficulties.

But the pressure was not only on Liu. Stan Shih (施振榮), the founder of Acer Group (宏碁集團) who served as a director of TSMC from 2000 to 2021, explains, "Chairman Liu's pressure came from making decisions (whether to go to the U.S.), but CEO Wei also faced great pressure, as he had to deal with clients."

2019 was also a critical year when Chinese 5G giant Huawei (華為) was aggressively suppressed by the U.S. In May of that year, Huawei was added to the U.S. Department of Commerce's Entity List, immediately putting TSMC and other Taiwanese manufacturers into trouble regarding compliance with regulations and adjustments to shipments. "We pooled our wisdom and made a decision, which was 'TSMC absolutely follows rules and regulations,'" Liu reveals the tone set in 2019, along with the subsequent organizational adjustments.

In 2019, TSMC established its first "non-sales oriented" overseas office, which is the U.S. office, located in the District of Columbia, Washington, "very close to the Capitol." At the same time, TSMC also strengthened its legal compliance team, "Because the U.S. began to control trade, once there was news that something might not be exportable, the legal compliance team had to immediately identify whether it was just a bluff or a law that must be complied with."

During an internal dinner meeting, a consensus was reached on "setting up a factory in the U.S."

However, in the "deep waters" of geopolitical impact, namely the demands from various parties for TSMC to set up a factory in the U.S. and provide overseas production bases, TSMC did not make any specific statements amid the pressure that came in 2019. It was not until May 2020 that TSMC finally announced its "intention to establish an advanced semiconductor fab in the United States," taking a significant step towards going global, which, of course, immediately sparked controversy. 

"TSMC has a unique feature, starting from Chairman Chang, that if there is no consensus during board discussions, the proposal is withdrawn," explains Shih. TSMC's decisions are based on consensus, and only proposals that the management team agrees on are genuinely brought to the board for discussion. The "overseas factory" issue, "in fact, had been brought up for discussion before Chang retired."

Regarding the board meeting in May 2020, Shih reveals that, as per TSMC's tradition, "The night before the board meeting, the chairman would dine with the directors to discuss important proposals." That day, Liu proposed the U.S. investment plan, "and everyone agreed with this view because it was a major trend."
"From TSMC's perspective, what the customers want is for TSMC to enter the U.S. It may not be economically reasonable, but it meets the market's needs," Shih continues. TSMC also needs the R&D capabilities of the U.S., "Many of TSMC's talents are Chinese Americans returning to Taiwan. The most important aspect of investing in the U.S. is that the technology does not become localized, and the Intellectual Property (IP) must be controlled by Taiwan."

Why is building a new semiconductor fab in the U.S. so important? Philip Li (李牮斯), a senior consultant at the Taiwan External Trade Development Council (中華民國對外貿易發展協會), points out two major factors. First, the semiconductor fab needs to establish production capacity when it leads in the manufacturing process, "because building a fab is very expensive, and you can charge a high price at the beginning, and others can cut prices (compete) when they enter." Second, the ultimate vision of foreign investment in the semiconductor foundry industry is that when technology reaches its limits and competition returns to the business model, "having the semiconductor fab next to the customer is a bigger advantage."

"At that time, many people would question whether we were pro-China or pro-America, or even directly say that we were taking sides," Liu recalls the various controversies after deciding to set up a factory in the U.S.; now, he can speak more freely about his inner considerations.

"We don't have this problem," says Liu, "Geopolitical plates are constantly shifting, and you never know which plate will rise next. The first goal of TSMC is to be able to stand upright…. As long as I can stand, that's more than enough." His answer was very pragmatic, "We can't take sides, but rather, we start from the interests of customers, shareholders, and employees."

Talking about Leading in Technology Amid Skepticism, He Entered Morris's Office to Finalize a Key Plan
The condition to stand upright involves not only the wisdom to negotiate geopolitical changes, but Liu, with his engineering background, is well aware that technological capability is the essence of TSMC. "In the environment of geopolitical changes, leading in technology is necessary. If you're not leading, why would others need Taiwan?" he says.

And speaking of TSMC's recent success in outpacing its competitors in technology, "7nm is the key," Liu confidently states.

"7nm is a milestone; it was the first time TSMC provided the world's most advanced technology," said Kevin Zhang (張曉強), TSMC’s senior vice president and deputy Co-COO, at a recent technology forum. He pointed out that in the semiconductor industry, those who could offer the most advanced technology in the past were IDM (Integrated Device Manufacturer) companies like Samsung and Intel.

In 2018, TSMC successfully launched its 7nm process, which entered the mass production stage the same year, and this battle was closely related to Liu. "That was when I was in Business Development," which is responsible for strategies for new products, new markets, and new businesses, "What I saw was that, compared to Intel, our 10nm process was not competitive."

Securing an Early Development of the 7nm Process to Establish Victory
Thus, he made a decision that seemed risky at the time, "While the 10nm was still in development, I suggested setting up another team to immediately start working on the 7nm process." Liu recalls that when he proposed this idea, there was some dissent within TSMC's R&D team, "R&D usually assesses what can be achieved before deciding whether to proceed; but my stance was that we must start from the market and demand, so it was a bit nerve-wracking!"

Despite the R&D team's hesitation, Liu went straight to Chang's office with his suggestion, "The founder agreed!" A crucial battle thus began. He explains that developing a new process technology usually takes two to three years, but for the 7nm process, "We mobilized many resources, and fortunately, TSMC is a company where the team cooperates well. We were able to launch it unexpectedly, and from that moment on, TSMC's technology has been leading the way."

His mention of "catching others off guard" refers to the fact that it took only one year from planning to launch. "Others thought catching up with the 7nm due to insufficient 10nm capability would take at least another two and a half years... but we did it in one year."

At that time, TSMC's competitor Samsung also launched a 7nm process, but it stumbled. Wu Jin-rong (吳金榮), the general manager of MiniCircuits (微驅科技), recalls that Samsung's 7nm process, used for Qualcomm's (高通) Snapdragon chips (驍龍晶片), frequently overheated, "It was mockingly called 'Fire Dragon' (火龍) by the outside world. Later, Qualcomm returned to TSMC for manufacturing."

Liu stated that since 2019, when TSMC took the lead in technology and its competitors "stumbled," TSMC has truly gained strong confidence as the leader in semiconductor foundry services. And how long can this confidence last? He confidently predicts, "It should be very hard for anyone to catch up with TSMC within ten years!"

Discussing the Sustainability Wave: "Did We Buy All of Taiwan's Green Electricity? No One Wanted It at the Time"
A plan that allowed process technology to leapfrog established TSMC's long-term leadership in technology. In recent years, facing the significant challenge of sustainability, TSMC took key actions early on. In 2020, TSMC signed a contract to purchase 920MW of wind power from Ørsted (沃旭能源), marking the largest corporate power purchase agreement in the history of the global offshore wind industry.

"At that time, Taiwan had just started developing wind power, and no companies were willing to sign long-term contracts with wind power developers," Liu recalls. On one hand, TSMC indeed had clear long-term green energy goals. On the other hand, seeing that developers had no orders and struggled to secure loans for continued construction, TSMC took the initiative to negotiate cooperation. "Some said we bought up all of Taiwan's green electricity, but the reality was, no one else wanted to buy it at the time."

In response, Christy Wang (汪欣潔), the chairman of Ørsted Taiwan, states, "At that time, both parties hoped that by taking action, they could inspire more companies to switch to green electricity." She also confirmed Liu's statement, directly pointing out that it was TSMC's support that made the financial viability of the wind farm project more concrete, "also helping Ørsted move towards the final investment decision."

Setting Goals from Water Recycling to Biodiversity
Besides actively planning the green energy ratio, including water recycling, waste disposal, and biodiversity protection, TSMC has set development goals in every area of sustainability. "We are also working on carbon capture, with the help of two professors," Liu candidly says. "Our clients are the most innovative in the world, and their countries have many requirements regarding the environment and climate change."

To this end, he mentions the two keywords he has most frequently used within TSMC in recent years: "green manufacturing" and "going global."

Discussing Future Prospects: TSMC on the Global Stage! "The Next Six Years Will Be Even More Exciting"
With new fabs planned in the United States, Japan, and Germany, this represents “stepping outside." However, Liu emphasizes that it's not just about expanding TSMC's production capacity outside Taiwan. "I also encourage TSMC colleagues to step out of the semiconductor fabs," he says. Being in a technologically leading company like TSMC, engineers "can easily become locked in an ivory tower, looking down on the changes happening in the outside world…. But, that's not right."

Liu cites an example where TSMC encourages employees to connect more with society, such as the "Eco Plus! Ecological Harmony Program"(Eco Plus!-生態共融計畫)  launched on May 22, aimed at ecological conservation on the hillside near the Taichung plant area. "Most of Taiwan's high mountainous regions are protected by the government, but the hillside areas below a certain altitude lack sufficient ecological protection," Liu says. The emphasis on biodiversity stems from the stimulation brought by international clients.

Encouraging employees to step out of the fabs and venture beyond Taiwan, Liu's expectations for his TSMC colleagues may also stem from his own characteristics and experiences.

Encouraging Young People to Make the World Their Home
"Do you think semiconductor engineers all look like stereotypical nerds?" he laughs while explaining his seamless transition from engineer to chairman. "The key is education!" He recalls his educational journey, "I had always been the leader in clubs, served as the president of the student association at the University of California, Berkeley, was a class leader at National Taiwan University (NTU, 台灣大學), and was also a class leader during my middle school years, from the first to the third year, only refusing to continue in the last semester." This also fostered his passion and concern for public affairs beyond his profession.

Stepping out of existing domains and venturing into new territory is Liu's advice to young people. "In 2018, I gave a talk at NTU, where I advised students to make the world their home, to use the world as a standard, and not to be complacent with the status quo. My advice remains the same now: Go out into the world!"

So, after surviving the challenges of geopolitical changes and making significant strides out of Taiwan in the past six years, what are Liu's expectations for "TSMC of the world"?

Boldly Setting Goals to Stimulate Colleagues to Challenge the Status Quo
"In 2019, TSMC's annual revenue was US$30 billion, and I told everyone, ‘The company must achieve US$100 billion in revenue before 2030," Liu explains. The bold declaration of this target was to outline a vision, to stimulate colleagues to challenge existing practices, and to make changes for the sake of the goal.

Although whether this US$100 billion goal can be achieved remains to be seen, Liu is indeed confident in TSMC's future. "In the past six years, TSMC's average annual revenue growth was 20%. The next six years will definitely be even more exciting!"
TSMC initiated a vaccine donation program during the rapid spread of COVID-19 in Taiwan in 2021. (Presidential Office)

The Signing of the Vaccine Procurement Contract at 1 a.m.
"To be honest, the most touching moment (during my tenure as chairman) occurred during the COVID-19 pandemic," Liu shares at the end of the interview, recounting a memorable story. In 2021, during the rapid spread of COVID-19 in Taiwan, that TSMC initiated a vaccine donation program.

"At that time, police, soldiers, and the elderly probably all had (vaccines), but the younger generation had nothing, which was actually very dangerous," Liu points out. A determination to help Taiwan's young people secure vaccines led the TSMC team to dare to face the highly politicized challenge of vaccine procurement.

The complexity of this process can be imagined, as the procurement contract had to be coordinated with multiple countries simultaneously, with all conditions and wording thoroughly considered. "At that time, colleagues had to constantly overcome time differences and work day and night, but they persisted."

Ultimately, when the contract was ready to be finalized, it was already late at night, but our colleagues did not want a moment’s delay. Liu vividly recalls, "Three colleagues, with a freshly prepared document, rushed to my residence in Taipei. When I signed it, it was one in the morning."

"What moved me was the effort they put in every day until 1 or 2 a.m., all in the hope of securing vaccines for Taiwan's young people." Driven by a sense of mission and responsibility, they gave it their all in completing the task. "I believe that most of my TSMC colleagues are like this," Liu says fondly.

Taiwan Business

The Taiwan Briefing

#TSMC#Mark Liu#Qualcomm#Morris Chang#semiconductor#Taiwan#technology industry#geopolitics#7nm process#green manufacturing
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