Morris Chang: the 'King' of Taiwanese Chipmakers

DeepDarkSky writes "This is a general interest story in the NY Times about Morris Chang - the founder and chairman of Taiwan Semiconductor - and the dynamics of semiconductor manufacturing in Taiwan, and how the earthquakes a while back affected it. Since Taiwan is the leading manufacturer of chips, with Intel, Motorola, and IBM (also Transmeta, as I vaguely recall in the press releases) all having chips manufactured in Taiwan, I thought this would be an interesting read. More significantly, also in the NY Times, another story about the U.S. House of Representatives voting to strengthen military ties with Taiwan. Perhaps they are all too aware of the U.S.'s (and the world's) dependence on Taiwan's chip manufacturing prowess (reminded by the earthquakes) and are eager to protect this source against China?" (free NYT reg. req.)

Comments

National Champions

[Paul Johnson]

Notice the history of Taiwan Semiconductor. The Taiwan government decided that it ought to have a chip maker, and handed Chang $100M to make it happen. Since then the relationship has remained cosy.

Its exactly this kind of crony capitalism that led to the crash of the Tiger Economies. In the UK we dropped the "national champion" approach to industrial policy when Mrs Thatcher became Prime Minister in 1979, and we are much better off as a result.

The problem with national champions is that they know they are too politically important to be allowed to fail. As a result they don't worry about running up losses because they know the government will bail them out. Sure, they can sometimes be success stories, but frequently they become economic millstones. UK readers who are old enough may remember the old British Leyland car makers. They were the national champions of UK industry during the 60s and 70s. It didn't take the unions there long to cotton on: the government wouldn't close them down or insist on layoffs because of the bad publicity, and hence they could strike for higher pay, shorter hours, or whatever else they wanted with complete disregard for anything else. BL became a byword for industrial strife, and the cars they made were famously bad.

Incidentally, while BL was destroyed by its unions, they are not the only thing that destroys national champions. The management can do just the same. Their primary cash flow comes from the government rather than their customers, and the government will still be there even if the customers go away. Hence their primary goal becomes pleasing the government rather than their customers. This problem is masked during the boom years because the company does not need to make unpopular layoffs, pay cuts or other measures. But when things turn down again, the management concentrate hard on extracting money from the government instead of becoming more competitive.

Remember the film "The Italian Job", a gold heist in Italy where three BL Minis were used as getaway cars? The film studio approached BL and asked if they could have the Minis in exchange for the valuable publicity. The BL middle-management thought about this and then turned them down. The reason was basically ass-covering. Saying "no" was the safe option. Saying "yes" could lead to Questions In Parliment about taxpayers money being wasted giving away cars to film companies. The extra sales that would result from people seeing the Mini as the perfect city car were irrelevant in this calculation.

Sooner or later, Taiwan Semiconductor is going to go the same way as British Leyland.

Paul.