Chip pioneer Morris Chang has returned to head up the world's largest chip foundry in bullish style - but is he worried by the onset of expanding competition?
Dr Morris Chang helped to set up Taiwan Semiconductor Manufacturing Company in 1987. It is a classic example of one of those hugely influential companies that few people outside its core business have ever heard of - and TSMC rather likes things that way. As a third-party manufacturer, it prefers that its customers bask in the spotlight.
It is, however, important to acknowledge the role TSMC plays today in maintaining both economic and technological progress in the semiconductor industry. Making chips has become a phenomenally capital-intensive business. Construction began on TSMC's latest site, Fab 15, in July. It is expected to cost around NT$300bn (£6bn) - and that does not include the hugely expensive R&D necessary to develop processes for the advanced 40nm, 28nm and lower nodes that the factory will run on high-capacity 12in silicon wafers.
The critical point here is that the task of shrinking process geometries and boosting transistor performance as required by Moore's Law has become hugely expensive. So costly, in fact, that even established chip companies that have their own fabs are now outsourcing to TSMC and other foundries for access to the latest manufacturing lines - and that is in addition to the wave of younger, 'fabless' companies TSMC's creation truly enabled.
So, Chang - today chairman and CEO - and his fellow founders saw all this coming. Certainly, he believes they have always had a logical - if not easy - sell on their hands. 'We haven't needed to become persuasive salesmen,' he says. 'You don't convince anyone to go to a foundry. They have to realise it for themselves. I wait for them to come to me.'
It is easy to see how this worked for fabless companies. TSMC clients such as Qualcomm, Broadcom and Nvidia began as start-ups that could not afford their own fabs even at 1990s prices. However, the move among existing manufacturers 'known as integrated device manufacturers, IDMs in chipspeak - has been more gradual, with these companies only releasing some production to foundries in the last decade.
'Take TI as an example,' says Chang. 'They stayed with hardware manufacturing for a long, long time - they didn't want to give it up. They did pretty much give it up though when they couldn't afford to do it anymore. Or while they could afford the R&D perhaps, they found that when they started to make chips based on it, they couldn't price them competitively.'
Today, not only TI but also STMicroelectronics, NXP Semiconductors and Infineon Technologies outsource some of their production at least to foundries in a business model described as 'fab-lite'.
There is good cause to paint Chang as a semiconductor visionary. He left China to study in the USA in 1949 and joined TI in the mid-1950s where he worked with Jack Kilby, inventor of the integrated circuit. Chang rose to head TI's global chip operations before leaving in the early 1980s to run General Instrument. He later established TSMC after returning to run Taiwan's state research organisation ITRI. Chang is thus one of the few 'ground-floor' IC pioneers still in a senior executive role with a major technology company.
Then there is TSMC's actual performance. It produced the equivalent of just under 10 million eight-inch chip wafers last year and its sales are almost as much as those of all the other foundries combined. In terms of sheer output, the company is on a par with Intel, which concentrates on microprocessors, and Samsung, which focuses on memories, with everyone else far behind.
'We think we are now pretty much like oil - and everybody needs oil,' says Chang. 'Now, you might think there's nothing glamorous about the oil companies, but they get their value-add every day.'
At the same time, TSMC has faced some challenges of late and Chang only returned to the CEO role and day-to-day management of the company last year, after having stepped down from it in 2005. The company had problems implementing its 40nm process at its existing 'gigafabs' and now faces a noisy, ambitious rival in Globalfoundries which is backed with petrodollars from Abu Dhabi.
With his company having outlined in February how it was addressing the 40nm issue, the battleplan now seems to cast Dr Chang as TSMC's answer to Sir Alex Ferguson, the esteemed architect of success who is not afraid to snap back at a chippy competitor.
'Sure Globalfoundries has deep pockets. Am I meant to be intimidated by those? There are a lot of people with deep pockets. China also has plenty of resources. It has ambitions,' says Chang. 'It's irrational in this business just to get intimidated by that. Deep pockets themselves can behave irrationally. We'll see what happens.'
Another challenge may meanwhile be on the horizon in Europe. There is renewed debate about creating a kind of 'Eurofoundry'. It follows the unravelling of the France-based Crolles Alliance into semiconductor manufacturing research that brought together leading chip companies from the continent and elsewhere (and of which was TSMC itself was a part).
To that end, the nanoelectronics strand of the European Commission's Framework Programme 7 this Summer commissioned a report on 'Benefits and measures to set up 450mm semiconductor prototyping and to keepsemiconductor manufacturing in Europe - the role of public authorities and programmes' (NB: 450mm here refers to the size of the wafers).
'If you want to say that the foundry industry is concentrated in Asia, or that semiconductor manufacturing generally is focused there if you add Samsung, then, yes, Korea and Taiwan are playing big roles. And China also will eventually. But my view is that you're looking at the wrong thing,' says Chang.
That view is not surprising given how many customers TSMC has in Europe, but Chang goes on to make his argument and attempt to influence the debate with some interesting history.
'I draw a parallel with Japan. It has also worried about maintaining a semiconductor manufacturing base for the last 20 or 30 years. But what have they gained from that? Nothing. In fact, you could say they lost,' says Chang.
He points out that 30 years ago, Japan's share of the global chip market stood at 50 per cent while the USA claimed 30 per cent. Today, those shares have in broad terms been reversed.
'In the same time, the share taken by fabless companies has gone from zero to roughly 20 per cent and most - not all, but most - fabless companies are from the US. So what the US has gained and what Japan has lost could be almost entirely attributed to fabless companies. What enabled that? Foundries,' says Chang.
'European companies are strong in design - that is what they are best at and they can choose to focus on that. And anyway, Globalfoundries does have manufacturing there [in Dresden, Germany]. But ultimately let competition take its natural course, and let the customers pick the best, the most advantageous suppliers.'
Chang stops short of making one further, perhaps salient point here. TSMC is itself largely a European creation, having had Philips as one of its founder investors (although the Dutch conglomerate did sell the last of its stake in 2008).
The TSMC chief professes himself optimistic for the future of the semiconductor business. Given its many alliance, his company has become an important bellwether.
'I don't think this cycle has been fundamentally different from any others in the industry, except in terms of its degree,' says Chang. 'The plunge was very steep and very quick - it took about three months. Then the surge was steep as well - but it again took three months.
'If you take 100 as the base, things dropped to 30 or 40 very suddenly, but then demand shot up to 200 as fast. So it was severe, but it was over very quickly. Six months and we were through it.'
In the near term, he expects the current fourth quarter and the first quarter of 2011 to represent a dip. 'But that's again always been how it works. It's fundamentally seasonal, in that the second and third quarters are strong, followed by a weaker fourth and first.'
In the longer term, Chang is looking to build TSMC's role in green products. In part, this has been reflected by an increasing focus on low power processes and design services for its core chip business. However, the company has also been establishing a role as a manufacturer of solar cells and LED lighting.
'These are investments in the hundreds of millions of dollars, so they're some way below the billions we have to invest in fabs,' says Chang. 'But green technologies are going to be important.'
But his core optimism expresses itself in technological terms, particularly the drive to smaller geometries.
'We haven't started to invest in 20nm [production] yet. Our investments so far and next year have and will be devoted to 28nm, 40nm and 65nm - the technologies that we know will work,' Chang says.
'But if you ask me how far will Moore's Law go and will TSMC be there? Well, Intel will try to extend Moore's Law as much as possible. Samsung will probably try for DRAM and Flash so they can leave their competitors as far behind as possible. But the main thing is that if Intel's there, we'll be there.'