TSMC chief sees world of smaller computing devices
Morris Chang's vision a decade ago of what would be smartphones and tablets led the Taiwanese firm to reap from making chips for the devices
In Morris Chang Chung-mou's crystal ball, the future belongs to smartwatches and glasses.
The 82-year-old chairman and chief executive of the world's largest contract chip maker, Taiwan Semiconductor Manufacturing Corp, forecasts personal computing devices will shrink even more.
Chang has an uncanny knack of calling it right. Nearly a decade ago, he anticipated personal computers would get lighter and have longer battery life, while mobile phones would have more computer-like features.
With that vision, TSMC redirected capital investment and rescheduled research and development work.
From 2011, the company started ramping up factories to make wafers that increase processing speed, extend battery life and keep mobile devices from overheating. It has 14 factories, mostly near the company's headquarters in Taiwan.
"The biggest contribution I've made in the last two or three years is capturing the biggest growth opportunity for the semiconductor industry - the mobile market," Chang said.
That foresight and related capital expenditures, which the company made for four years despite the turbulence in the global economy, have helped give TSMC a 70 per cent market share as smartphone and tablet sales continue to rise by leaps and bounds.
TSMC refuses to disclose how much of its last year's capacity of 15.1 million eight-inch equivalent wafers went into mobile devices. But capital expenditures totalled US$5.9 billion in 2010, US$7.3 billion in 2011 and US$8.3 billion last year.
"Feature phones were already in abundance back then … what we now know as tablets, back then we thought we would deal with at least lighter PCs that would be easier to carry around when you travel," Chang said.
"I used to try to carry a notebook PC when travelling, but after one or two trips I decided it was not worth the effort.
"So we decided there would certainly be a market for notebooks PCs, or whatever you want to call it, if they are easier to carry around.
"We were the only ones who saw it first. We saw it back in the mid-2000s."
For that reason, Chang said, TSMC outpaced the overall semiconductor industry with growth of about 18 per cent last year, and expected 20 per cent growth this year, again more than its rivals.
He said the company would post until 2016 an average annual profit growth of 10 per cent.
TSMC's sales revenue last year came to NT$500 billion (HK$129 billion), with profit of NT$166 billion.
"What can I say? He's the godfather. I don't think anyone was expecting something that quite looked like the iPhone," said George Chang, an analyst with Yuanta Securities.
TSMC's "counter-cyclical" capital expenditures, when competitors might have been afraid to invest, had ensured supply, he added.
TSMC's rival, MediaTek, is gaining market share in smartphone chips, however, particularly white-box brands made and sold on the mainland.
As a boon to semiconductor firms, global tablet shipments are expected to grow about 68 per cent to 202 million units this year, market research firm Gartner forecasts.
Smartphone shipments are expected to grow 32.7 per cent to 959 million units this year, according to IDC, another market research firm.
Born on the mainland, Morris Chang gained a doctorate in electrical engineering at Stanford University. He then joined Texas Instruments, where he worked for 25 years until 1983, including six as semiconductor group vice-president. In 1984 and 1985, he was president and chief operating officer of General Instrument Corp, a US-based maker of semiconductors and cable-television equipment.
Taipei then recruited Chang as the president of the Industrial Technology Research Institute, an incubator for new technology nurturing the island's massive information technology industry. Shortly afterwards, he was asked to set up a semiconductor company for Taiwan. In 1987, he established TSMC, the first integrated circuit foundry that manufactures only for external customers.
Since 2004, TSMC has worked with designers of processor architecture, such as Britain-based ARM, and software developers on a formula for low-power chips - a "grand alliance", as Chang calls it.
In another decade, Chang predicts, mobile devices will be attached to people's bodies.
"Ten years from now I see a lot more things that will also be mobile," he said. "Actually, you already see them, like the Google glasses, the wearables, the watch, that type of thing.
"It's kind of funny though, when you wear the glasses you look like a man from Mars."