Microchips run everything and the best microchips are made by TSMC.
The Taiwan Semiconductor Manufacturing Company. TSMC chips have put Western tech companies, and
militaries, streets ahead of China, and China is not happy about it. TSMC is so important,
the world could go to war over it.
I'm Matt Bevin and this is If You're Listening.
TSMC's story starts in 1958 in, where else but, Dallas Texas.
[Music]27 year old Morris Chang was at work a microchip Factory belonging to Texas
Instruments. it's a company that made AM radios and calculators and gear for the US oil industry, hence
Texas, and Morris had a problem. See the factory was supposed to make microchips
to go in their products and it wasn't. See microchips are incredibly difficult to make.
The process of manufacturing a microchip is so complex and intricate it's hard to believe it was ever developed.
At the factory Morris was working in almost none of the chips they were
making were working correctly. Morris Chang was a Harvard educated engineer. He fled from China
as a teen. He had worked hard to get where he was and now it was time to prove himself.
He started fiddling with the factory settings for how they made microchips - turned down the
temperature here, increased the pressure there, combining these chemicals with those ones.
Within weeks the Factory's yield was up to 20 percent and then 30 percent.
His bosses noticed how successful he'd been and started promoting him. Texas Instruments
paid for him to get his PhD. They gave him bigger and bigger responsibilities.
He was apparently a pretty tough boss. He had a short temper and getting screamed at by him became a bit of a
rite of passage at Texas Instruments. He was also famous for the fact he was almost constantly smoking a pipe.
On top of electrical engineering he's one of the world's best players of the card game Bridge.
Morris is just one of those guys who seems to be really good at anything he puts his mind to.
Ten years later Texas Instruments was doing so well they were looking to set
up more factories in other countries, so Morris Chang and a colleague went on a tour of Asia.
His colleague's name was Mark Shepard. The son of a Dallas cop, he looks like an AI generated
generic Texas businessman. They made a stop in the Taiwanese capital.
[DOCUMENTARY] Taipei the capital is a modern city with many Western habits including the mini skirt and a fear and hatred of communism.
Neither Morris nor Mark had ever been to Taiwan before. Mark Sheppard made that abundantly clear by
throwing a tantrum in a Taipei restaurant after he was served a steak with soy sauce instead
of barbecue sauce. Didn't they know he was from Texas? Later, Mark and Morris met with Katie Lee - sorry,
Mark and Morris met with K T Lee, a minister from the Taiwanese military dictatorship government,
and the meeting didn't go well at all. Minister Lee accused the Texan of being an American imperialist,
which you know he was, but you don't just say that. They all left in a big huff, but Morris managed to
convince both men it was in their best interests to make a deal. For Texas Instruments, Taiwan was a
great place to get some cheap workers, and for Taiwan building microchips for America might
provide protection against communist China. The United States tends to try and defend places they trade with.
[DOCUMENTARY] The move now in Taiwan's industry is up market into higher technology.
Foreign investment and foreign technology are welcome. [MATT] And so the first microchip Factory in Taiwan was built.
Morris resumed his work back in Texas and it was here that he gradually developed
an idea that would change the course of his life and the future of the world.
You see, just like Texas Instruments, all the tech companies around at the time were expending
enormous amounts of time and effort figuring out how to run good in-house microchip factories.
Morris Chang thought that was silly. Microchips are probably the hardest
thing in the world to manufacture. They require unbelievably complicated and expensive machines
running in the cleanest environment on Earth. You see a microchip is a circuit board like
the green ones you've seen in pretty much everything electrical, except
[DOCUMENTARY] ... the electronic circuits simply cannot be seen by the naked eye.
[MATT] Back here on my shelf I've got an old 1950s ... hang on ...
I've got an old 1950s microphone amplifier. if I open it up you can see
it has about 60 transistors, little electronic switches welded by hand onto a circuit board about
the size of a block of chocolate. If you were to make a microchip of the type that's in your phone
or laptop in the same way you'd need a circuit board about the size of an International Airport.
That's how incredible today's modern chips are. The secret to how special they are is
that we can make them very, very small. To make a microchip you need to use a laser to print
billions of transistors and connections onto a thing the size of a thumbnail.
[DOCUMENTARY] The circuits are a series of elaborate patterns etched into the surface of the silicon, layer by layer.
[MATT] You see? Super hard to make. Morris thought all the tech companies should focus on
designing the microchips and outsource the actual manufacture to a company that specializes in it.
It's like if everyone in town was trying to learn how to do their own dentistry,
instead of just outsourcing it to an expert dentist. The results would be quite [PERSON SQUEALING] unpleasant.
Morris suggested this to Texas Instruments over and over but they never budged.
Morris rage quit. [CARTOON RANTING]
In the early 80s, years on from their first meeting in Taipei, the Taiwanese Economy Minister K T Lee gave Morris Chang another call.
While Mark Sheppard may have put Morris out to pasture
K T Lee saw him as the future. He made Morris an offer. K T Lee was offering
him a blank check to build a company that would make Taiwan the microchip capital of the world.
Make Taiwan the dentist, the place that all the tech companies go to get their chips made.
The Taiwanese government put in half the money. They bullied wealthy Taiwanese businessmen to chip in too.
The plan wasn't to design a perfect microchip. They were going to design the perfect microchip factory.
[PROMOTIONAL VIDEO] TSMC pioneered the dedicated semiconductor foundry business model.
The Taiwan Semiconductor Manufacturing Company was born with Morris Chang at its head.
40 years on from when it was founded, TSMCis making the smallest chips in the world and the labs they're made in are incredibly high tech.
Earlier this year the ABC's East Asia correspondent Bill Birtles struggled
a bit with all the protocols for getting into a Taiwanese microchip lab.
[BILL BIRTLES] So you sort of step into it ...
like a onesie.
It's quite a process just getting into one of these labs.
[EXASPERATED SIGH] [LAUGHTER]
[MATT] He put on a hat, gloves, special shoes and got into an airlock where jets of air blew
off any particles that may have got stuck on his clothing. The worry wasn't that he
would catch something from inside and bring it out, the worry was he would bring something in.
[DOCUMENTARY] it looks more like a hospital than a factory because a single speck of dust can ruin a chip.
They are in fact cleaner than a surgical theatre. Even the machines are specially made so that
they don't shed particles. Having dust specs in a microchip factory is like having rhinos running
around in a car factory. These transistors and connections are barely wider than atoms
and in the chip world, smaller means not only that they take up less space but also it makes
them more energy efficient and more powerful and TSMC can make these tiny chips more quickly than
anyone else. It's the most valuable company in Asia and last year was the eighth-most valuable
company in the world. It's responsible for five percent of Taiwan's GDP and seven percent of its electricity consumption.
[NEWS STORY] TSMC pumps out close to 60 percent of the semiconductor chips used around
the world and makes 90 of the most advanced ones.
[MATT] it's kind of an extraordinary situation.
You've got a resource that's needed for basically everything in the modern world all coming from one place,
[NEWS STORY] ... making it the most valuable and indispensable chip company in the world.
TSMC is so essential to the global economy that Taiwanese media calls it the "sacred mountain" protecting the
island from Invasion by communist China. But is it actually protecting them or is it a giant target?
Let me tell you a little story. Centuries ago a cluster of 11 small islands in Indonesia was
the world's only source of the spice nutmeg. Nutmeg could be used not only for flavour but to preserve
meat and Europeans thought that it could also cure diseases. it was worth more than its weight in gold.
That was fine for a while, but eventually the Dutch decided that instead of buying it from Silk Road
Traders they would invade the islands, kill almost everyone there and take the nutmeg for themselves.
Now imagine you were relying on the Silk Road Traders. What happens if your
precious nutmeg falls into the wrong hands?
Taiwan? They've got the nutmeg,
and China wants it.
And tension is increasing between mainland China and Taiwan.
Beijing has conducted massive military exercises close to the island, raising fears that Chinese President Xi Jinping
will fulfil his promise to take control of Taiwan either with an invasion, or with blockade.
To try and get around that the U.S, Germany and Japan have convinced TSMC to start construction
on factories in their countries to ensure the supply of chips to the U.S and its allies.
Just last year Donald Trump's former National Security Adviser Robert O'Brien appeared at an
event for the Council on Foreign Relations.
ROBERT O'BRIEN] I think the TSMC situation is a little provocative for China right now and doesn't provide security.
In fact it counter-intuitively lessens the security of Taiwan.
[MATT] He's saying that China does not like that Taiwan has such a precious resource and that it's provoking China to attack.
O'Brien then said that Winston Churchill decided to sink the French Fleet rather than allow the Germans to capture it during World War II.
So if China invaded Taiwan he suggested that the U.S should follow Churchill's example to stop Xi Jinping taking control of the TSMC factories.
[O'BRIEN] Can we allow the you know the equivalent of the Germans taking
the French Fleet, uh Churchill didn't allow that. Could we allow that?
[MATT[ Robert O'Brien's statement made headlines in Taiwan. He tried to clarify it saying that he didn't think that the
U.S should promise to blow up TSMC if China tried to invade, but clearly some in America are afraid.
The ramifications of letting China take over that company could be massive. They would control one of
the world's most valuable resources. America's fear is that they could stop selling us the chips if
they liked or sell them at such high prices that it makes non-Chinese companies unprofitable. After all,
it's happened before. That's what the Dutch did with the nutmeg once they seized those islands.
In 2022 the world's most successful investor, 92 year old Warren Buffett, bought more than
four billion dollars in TSMC shares and then in 2023 he sold them all at a loss. He said he
didn't like the company's location. He said the risk of confrontation with China was too great.
Morris Chang is not afraid of a Chinese invasion. He is now also 92. He retired
as CEO of the company he built in 2018, but still appears at public events. He can't smoke his pipe
anymore, but he still plays Bridge, something else he has in common with Warren Buffett.
The two men talk a lot about how much the game has in common with business,
but as for TSMC it remains to be seen which of the two has made the right bid [Music]
G'day Matt here. Just here to let you know that if you want to listen to or watch more episodes of If
You're Listening you can do that right now on the ABC Listen app. There's a lot of them, and there's
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