Morris Chang refuted by Yeh Wanan, Taiwan was unwilling to invest in TSMC

Morris Chang’s deny of Taiwan government active support causes Chang refuted by Yeh.

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Chang Openly Questions Taiwanese Government

On March 16, 2023, CommonWealth Magazine invited TSMC founder Morris Chang to a live conversation with Chris Miller, author of “Chip Wars.” During the conversation, Morris Chang stated, “When TSMC was founded, the government played only an investor role, and a reluctant one at that.”

He also suggested that Miller’s book, “Chip Wars,” should be revised: “Miller may have overemphasized the government’s role in TSMC’s founding in 1987.” Morris Chang specifically mentioned, “It was Minister of Economic Affairs Li Kuo-ting, against all odds, who fully supported Morris Chang, which ultimately persuaded the government to invest a 48% stake in TSMC.”

Note: For details on the key content of book “Chip Wars” please see my post of “What does book “Chip War” talk about?”

Chang’s claim caused Yeh’s dissatisfaction

Nearly 100 years old, Yeh Wan-an still frequently contributed articles to the United Daily News’ “Public Opinion Forum.” One of his articles refuted TSMC founder Morris Chang’s claim that the government was unwilling to invest in TSMC. Drawing on his own experience following Li Kuo-ting for nearly 50 years, Yeh Wan-an wrote a powerful piece titled “My Questions,” detailing how Li Kuo-ting and his finance cabinet members overcame numerous obstacles to raise funds for TSMC.

He also described the painstaking efforts of former Premiers Sun Yun-suan and Yu Kuo-hua, starting with the founding of the Industrial Technology Research Institute and TSMC. This demonstrates that even amid widespread pessimism about the semiconductor industry (legislators opposed it, private companies were reluctant to invest), the government forged ahead, fully trusting Morris Chang and fully supporting this startup. This still seems incredible today. How could this be the case, as Morris Chang claimed, of “the government was unwilling to invest”?

Li Kuo-ting campaigned vigorously for funding

Mr. Chang and Chris, author of “Chip Wars.” Chris Miller’s remarks during the on-site interview differed significantly from the history of Yeh Wan-an, who had followed Li Kuo-ting for nearly 50 years. Li Kuo-ting personally told Yeh, “After UMC was founded, integrated circuit research should be upgraded. He instructed ITRI President Morris Chang to study the feasibility of developing very large integrated circuits in Taiwan.” Morris Chang concluded that it was feasible, but the equipment investment was enormous, and ITRI couldn’t afford it. Li Kuo-ting believed that as long as it was feasible, he would handle the funding.

Consequently, Li, Minister of State and Convenor of the Executive Yuan’s Applied Technology Group (not the Minister of Economic Affairs, as Chang mentioned), assisted the Ministry of Economic Affairs in requesting the Executive Yuan to use the Second Reserve Fund to support ITRI’s procurement of very large integrated circuit equipment, demonstrating the government’s commitment to the project.

Li Kuo-ting acted as a matchmaker

Soon after, President Morris Chang concluded that such a large investment solely for research was uneconomical and suggested separating ITRI from the company and establishing an independent company, similar to UMC. This could also stimulate the development of upstream and downstream industries. However, raising substantial capital to establish an independent company was a major challenge.

Li Kuo-ting not only accepted President Chang’s suggestion but also suggested that the funding problem could be solved by inviting large private companies to invest NT$500 million each. So Li Kuo-ting brought Morris Chang to the Council for Economic Planning and Development and invited Chairman Zhao Yaodong to visit several major corporate leaders, including Wang Yung-ching, Koo Chen-fu, and Wu Shun-wen. Chairman Zhao returned and told us that the hope was slim, saying they had no understanding of integrated circuits and that profits wouldn’t be realized in the first few years. However, to give Councilor Li face, he would invest a small amount.

Li Kuo-ting insisted Taiwan control TSMC

At the time, Philips, a Dutch company, wanted to invest 51%. Li Kuo-ting welcomed Philips’ investment, but not too much, and that the new company should be led by Taiwanese. Li Kuo-ting then took Morris Chang to the Executive Yuan to meet with Premier Yu Kuo-hua to discuss the establishment of TSMC. Premier Yu not only agreed but also supported Li Kuo-ting’s proposal for Taiwanese leadership.

At a meeting of the Executive Yuan, instructions were issued to actively promote the VLSI industry. A five-member preparatory group was established, with Council for Economic Planning and Development Chairman Zhao Yaodong and Minister of Economic Affairs Li Dahai as co-conveners. Finance Minister Qian Chun, National Science Council Chairman Chen Li-an, and Industrial Technology Research Institute President Morris Chang served as members, with Chang also serving as executive secretary. As a result, private investment totaled US$35 million, accounting for 24.2% of the total, Philips invested US$40 million, accounting for 27.5%, and the government, including the Development Fund, invested US$70 million, accounting for 48.3%. All investments were in cash, with no technology shares.

US$70 million investment was not small

From the above, it appears that the VLSI project and the founding of TSMC were strongly supported not only by Li Kuo-ting but also by two successive Premiers, Sun Yun-suan and Yu Kuo-hua. Opposition was common during the process, but it does not represent the government. A government investment of US$70 million was no small sum at the time.

Five years earlier, when UMC was founded, its capital was only NT$360 million. TSMC’s investment of NT$5.5 billion was 15 times greater than UMC’s. This demonstrates the magnitude of TSMC’s investment. The government’s complete hands-on approach to management demonstrates its trust in you. So how can the government’s investment in TSMC be “reluctant”?

Note: For more details on this story, see my post of “TSMC Morris Chang’s controversial words and deeds“

Living Persons Support Chang refuted by Yeh

After Yeh Wan-an’s short article was published, many friends who participated in and were familiar with TSMC’s founding process called and even wrote to support my argument. This suggests that many people are dissatisfied with Morris Chang’s claim that the government was “reluctant” to invest in TSMC and believe it is unfair.

Chang had no choice but to admit the facts

The second volume of Morris Chang’s autobiography was recently published in December 2024. Yeh bought it and read it. Regarding his work in Taiwan at the Industrial Technology Research Institute (ITRI) and TSMC, Yeh found that on page 444, in the third paragraph, he wrote, “But I must admit that without government investment and assistance, I could not have built TSMC.” He finally admitted that the government provided not only investment but also “assistance.” He told the truth and no longer mentioned “reluctance.”

Thankfully, there’s Yeh Wan-an

Yeh Wan-an is straightforward and never equivocates. He despises those who distort the facts, and he even more despises those who distort the facts. He has used economic data to challenge Presidents Lee Teng-hui, Chen Shui-bian, and Tsai Ing-wen, accusing them of “lies” and saying, “The Presidential Office has truly become a hub for stock speculation and lies.”

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