TSMC's Founder Kept Building Chip Factories in the 2008 Recession

Morris Chang had already stepped aside. In the late 2000s, the founder of TSMC, the Taiwanese company that manufactures advanced computer chips designed by other companies, turned the company over to new managers. Then the Great Recession hit.

The new managers cut back. Plans for expensive new chip plants were trimmed to get through the downturn, the standard move to protect cash when demand falls.

Chang came back, dismissed senior leaders, and reversed course. The iPhone had just launched, and he treated it as the largest opportunity the company had ever faced. Chang's message was simple: "We need to be investing, not cutting."

That decision remade TSMC. A chip plant is a decades-long commitment. TSMC expects a plant it builds to run for 30 years, so adding too much capacity leaves the system carrying extra capacity for years and years. For that reason, the company leaned conservative, preferring to build too little rather than too much. To keep spending in a recession, inside that kind of cautious company, was an unusual gamble.

TSMC kept spending during the recession and the slump that followed. That spending laid the foundation for the company to take over production of leading edge semiconductors, the smallest, fastest, and most valuable chips in the world.

The caution behind that success never left. TSMC still worries most about building too much, with all the fixed costs and unused buildings that would follow, so it builds carefully. The danger of getting it wrong did not vanish. It shifted to its customers.

It now shows up not as empty factories but as missing sales. Big technology companies say that if they had more computing power, they could earn more revenue and profit. That foregone revenue and foregone profit is the result of relying on a supplier determined not to overbuild. The recession bet gave TSMC its dominance in advanced chips, and the same conservatism still limits how much computing its customers can buy.