Lessons from TSMC Founder Morris Chang

Founders must strategize to compete effectively against larger rivals.

"I wasn't too worried... we had our own advantages in technology, manufacturing, and customer trust."

• Dr. Chang focused on TSMC's strengths against competitors.
• Emphasizing unique advantages helped TSMC succeed.
• Confidence in core competencies can overcome competition.

Building customer trust is essential for founders to ensure success.

"He told me there's nothing to worry about. Because Intel just does not know how to be a foundry."

• Dr. Chang emphasized customer trust over competitors.
• Trust led to TSMC winning business over larger rivals.
• Focusing on customer relationships secures success.

Founders often face tough negotiations; being prepared is key.

"He told us just a number... He had to make his component costs meet a certain goal. But anyway, that was settled."

• Dr. Chang prepared for Apple's pricing negotiation.
• Understanding mutual needs led to agreement.
• Effective negotiation secured a profitable deal.

Founders need strategies to secure major clients in new markets.

"I knew that Apple is a very... company. If you try to talk to them... they would just tell you to go away. They will come to see you when they are ready."

• Dr. Chang understood Apple's approach to partnerships.
• He positioned TSMC strategically to be ready.
• Patience and insight secured TSMC's partnership with Apple.

Founders must nurture talent to develop future leaders.

"I first offered the marketing... business development job to the guy who was in the bigger job... and he declined it... So I then offered the business development job to CC, and he accepted it."

• Dr. Chang provided growth opportunities within his team.
• He matched talent with strategic roles for success.
• Developing leaders strengthened TSMC's future.

Founders need to identify and act on market 'sweet spots' for product-market fit.

"They began to tell me, 28 is gonna be a sweet spot... So I decided that I would believe him."

• Dr. Chang trusted his team's market insights.
• He acted decisively on identified opportunities.
• Recognizing 'sweet spots' led to growth.

Founders should prioritize consistent R&D investment to drive innovation and growth.

"I decided to set the R&D budget at 8% of revenue, regardless of whether there's a recession or not."

• Dr. Chang committed to steady R&D investment.
• This ensured continuous innovation and competitive edge.
• Consistent R&D spending built TSMC's technological leadership.

Founders can use the learning curve to gain competitive advantage.

"Explaining the learning curve theory is simple. As you make more of one thing... its cost per unit goes down. But one would be foolish if one just takes that simple explanation and thinks that's all it is."

• Dr. Chang leveraged the learning curve to reduce costs via scale.
• Scaling production led to TSMC's market leadership.
• Applying this concept can guide founders' strategic choices.

Founders must persuade stakeholders to invest in innovation despite risks.

"I had to say, well, look, I heard you, but I am still the guy that's responsible for the operation of the company. So you need to let me go ahead with this one."

• Dr. Chang stood firm on investing in 28nm technology.
• He confidently conveyed his vision to the board.
• His leadership propelled TSMC's advancement.

Founders must handle disputes with key customers to maintain partnerships.

"I gave him the offer. It was on the order of 100 million dollars. I also said, our offer is effective 48 hours. If you do not accept, we're not going to bargain. If you don't accept within 48 hours, we'll have to go to an arbitrator."

• Dr. Chang directly negotiated with Nvidia, making a clear and fair offer.
• He set a firm deadline to prompt swift action.
• The resolution strengthened their future collaboration.