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Mercury News interview: Morris Chang, founder, chairman, CEO of Taiwan Semiconductor Manufacturing Co. [San Jose Mercury News, Calif.](San Jose Mercury News (CA) Via Acquire Media NewsEdge) Aug. 26--He is the tech revolutionary who wears a suit, not a black turtleneck like Apple's Steve Jobs. He isn't in the pop spotlight, such as Facebook's Mark Zuckerberg, who had a Hollywood movie made about his rise. Nor does he have the swagger of Oracle's Larry Ellison. But Morris Chang rearranged the global tech world like few others when he founded TSMC, or Taiwan Semiconductor Manufacturing Company, in 1987. The company was based on a radical business model: a foundry-for-hire would make semiconductors for customers but never compete with them or put any claims on their intellectual property. He helped jump-start the tech economy of Taiwan, and provided the impetus for the emergence of the fabless chip industry in Silicon Valley and across the globe. When he shows up at public events in Taiwan, reporters and TV crews swarm him with paparazzi ferocity. Today, fabless semiconductor companies have grown into a $73 billion-plus industry and TSMC dominates the contract foundry industry with about 50 percent market share. Taiwan, meanwhile, is a technology powerhouse. "There are very few people who do things that literally transform an industry and it's not an exaggeration to say that is what Morris did," said James Plummer, dean of the school of engineering at Stanford University. For his accomplishments, Chang on Aug. 20 was awarded the prestigious Medal of Honor from IEEE, the world's largest technology association. Previous awards have included 10 Nobel Prize winners. Chang, 80, sat down with this newspaper earlier this week at TSMC's North American headquarters in San Jose. Here is an edited version of the interview: Q You created a new industry when you founded TSMC. A That model certainly effected the world semiconductor industry and, I think, the world electronics industry. I really had no competitors at the beginning. We were just a small company in Taiwan. (The semiconductor industry) didn't pay much attention to us. They didn't think we were going anywhere. We started in 1987. Later that year or in 1988, (Intel's) Andy Grove visited Taiwan and decided to drop in and look at TSMC. I showed him we were getting good yields on three micron technology, which was two-and-a-half generations behind Intel and Texas Instruments, but we were getting yields and he was impressed. He said, 'Maybe Intel can use you.'... By the early '90s, fabless (companies) grew up like a bamboo shoots. They needed us and we needed them. Q You have obviously spent a lot of time in Silicon Valley. Companies here rely on TSMC to make chips for their devices. Taiwan component makers design and manufacture key parts of everything from iPads to laptops. How do you describe that relationship evolving? A I think it's a productive relationship. But I also think that maybe Silicon Valley or the United States has given up too much manufacturing. The situation is Asia -- Taiwan, China and now other countries -- has basically taken over the manufacturing end. We are not the most prominent part of it. We don't hire that many people. TSMC is a very highly value-added company . . . and we have 30,000 people. Our value-add per employee is a lot like the technology companies in the United States -- HP, IBM. Hon Hai (the world's largest gadget manufacturer for companies such as Apple and Hewlett-Packard), they have close to a million employees, almost all in China. I am an American. I am worried. I think a lot of stuff should not be given up. The United States can learn from Intel. They have kept as much as possible in the United States. You can look at automation tools that minimize labor hours. Intel looked for those ways and they are very successful. Our costs are more determined by the quality of engineering than by the wage level of the manufacturing location. We have a manufacturing operation in China which has a lower wage level, but the quality of engineering is not as good as Taiwan's. Therefore total costs are higher (in China). Q Can China supplant Taiwan as the world's technology design house? A Eventually, China will be a threat to everybody. However, China is not perfect. The (employee) turnover rate is far too high. Our turnover rate at the TSMC facility in China was as high as 30 percent a few years ago. We have managed to get it down to 15 percent, but even that is too high. The employees are not loyal. Intellectual property protection is difficult. Innovation has never been a strong suit in the Chinese universities. They don't develop a young person's innovative abilities. A few top Chinese universities have changed. It's not a very good environment. So I don't think of them as an unstoppable juggernaut. Q The global economy is once again wobbly. How does it look from your vantage point? A I think the next year may not be very good, which is disappointing because earlier this year we thought this year was going to be quite good. We really thought the economy was going to recover. Now we have not only pretty much given up (on 2011 being a global economic turn-around year), we are even worried about next year. It doesn't look like we are going to exit this year with any momentum at all. We have built our company to last through these (difficult times). Even when business is bad, and the utilization of our fab is very low, we still make money. The Taiwan culture is to avoid layoffs at all costs. We have never had layoffs. Contact John Boudreau at 408-278-3496. Morris Chang Age: 80 Birthplace: Ningbo, China Title: Founder, chairman, CEO of Taiwan Semiconductor Manufacturing Co. Education: Bachelor of Science and Master of Science degrees in mechanical engineering, Massachusetts Institute of Technology; Ph.D. in electrical engineering, Stanford University Previous positions: Management positions at Sylvania Semiconductor, Texas Instruments and General Instrument Corporation and head of the Industrial Technology Research Institute, a government-sponsored research organization promoting industrial and technological development in Taiwan. Residence: Splits his time between Taipei and Hsinchu, Taiwan. Family: Married with one daughter from first marriage and two stepdaughters 5 Things About Morris Chang 1. He wanted to be a writer, but his father persuaded him otherwise. 2. He enjoys playing bridge. 3. He is a fan of classical music. 4. He travels to Silicon Valley a few times a year, where TSMC has its North American headquarters. 5. His favorite computing device: BlackBerry. ___ (c)2011 the San Jose Mercury News (San Jose, Calif.) 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