Brothers Jason (left) and Richard Chang of Advanced Semiconductor Engineering (ASE), the world’s largest provider of independent semiconductor assembling and test manufacturing services.
COURTESY OF ASE
Few of the 1,000-plus companies in Taiwan’s semiconductor galaxy are visible outside the industry. Fewer still achieve global fame. The exception is Taiwan Semiconductor Manufacturing Co. (TSMC), founded in 1987, and now ranked as the world’s second most valuable semiconductor company after Nvidia (cofounded by Taiwan-born billionaire Jensen Huang). Yet, despite the company’s international prominence, its billionaire founder, Morris Chang, enjoyed little name recognition until recently.
Most of Chang’s fellow elite Taiwanese semiconductor company founders are as obscure as semiconductor chips are ubiquitous in modern life. Semiconductor chips are the world’s fourth most traded product after crude oil, motor vehicles and parts, and refined petroleum. An average car, from airbags to engine, is fitted with 1,400 semiconductors.
Taiwan’s semiconductor industry employs a local workforce of 600,000. It accounts for an 18% share of the global market, second only to the U.S.’s 39%. In terms of revenue, it generated $170 billion in 2022, compared to $378 billion for the U.S., according to Taipei-based Market Intelligence & Consulting Institute.
Despite its global heft, Taiwan’s semiconductor industry is largely an army of small and medium-sized enterprises, says Brady Wang, an associate director at technology research firm Counterpoint and a former TSMC engineer, noting that they are relatively small compared to their international peers.
Only the top five semiconductor companies in Taiwan generate revenue over NT$100 billion ($3.1 billion), according to figures for 2021 compiled by the Industrial Technology Research Institute (ITRI). The five are TSMC, MediaTek, ASE Technology Holdings, United Microelectronics Corp. (UMC), Novatek Microelectronics (a subsidiary of UMC) and Realtek Semiconductor.
And only the top three companies find their founders listed on the Forbes billionaire ranks: TSMC’s Chang, Tsai Ming-Kai of MediaTek, one of the largest wireless chipmakers; and brothers Jason and Richard Chang of ASE, the world’s largest independent semiconductor testing and packaging company.
Most company founders and major shareholders in Taiwan’s semiconductor space prefer to keep a low profile, according to John Chen Tzi-ang, an industry veteran and board director of Hua Nan Financial Holdings’ venture capital investment unit. “Most of them have left the management to professional managers, not to their sons or daughters,” he says. “That’s why foreign investors like to invest in the industry.” Foreign institutional investors, for instance, owned about 50% of TSMC and 70% of ASE.
The title of Taiwan’s wealthiest semiconductor company founder goes to the Chang brothers of ASE. Jason is chairman and Richard vice chairman of ASE; together their net worth is $6.3 billion, placing the duo at No. 7 on Forbes‘ list of Taiwan’s 50 Richest this year.
They are followed by Tsai, chairman of MediaTek, who has a net worth of $2.45 billion on the Taiwan’s 50 Richest list. At MediaTek, Tsai presides over the production of chips that power well over two billion electronic devices a year. They go into 20% of households and nearly one of every three mobile phones globally—a large portion of them in China.
TSMC’s Chang, though far from the wealthiest, wields the most influence at home and abroad, both politically and industrywide. At 92, Chang’s high profile is an exception rather than the norm. He was Taiwan’s representative to the Asia-Pacific Economic Cooperation summit, a regional multinational gathering, for six times.
Fast catching up to Chang’s high profile is his former nemesis, UMC founder and former chairman Robert Tsao, who recently captured the media limelight because of his outspoken criticisms of the Chinese Communist Party. Tsao and his cofounder John Hsuan own significant stakes in UMC, Taiwan’s second-largest contract chip maker after TSMC, through an investment company.
In fact, it was the Taiwan government that took the strategic move to create TSMC and UMC through state investment funds. Today it is content to remain a minority shareholder, owning about 7% and 2%, respectively, in the two firms.
Chen of Hua Nan Financial Holdings recalls that TSMC and UMC were spun off from the state-funded research lab, ITRI, his employer at the time. “The government had absolute control in the early days, but it no longer does,” Chen says.
The person who set Taiwan on the semiconductor path – while the island was still under martial law in the 1980s – was economist Li Kwoh-ting, better known in Taiwan as K. T. Li, who was then a cabinet official. Credited as Taiwan’s “godfather of technology,” he was instrumental in luring Chang to Taiwan from the U.S., where Chang had built a solid career at Texas Instruments. Li gave Chang a free hand, and was not disappointed. Chang had the foresight to carve out an entirely new semiconductor niche for Taiwan, that is, contract chip-making, or foundry.
Chang set out to churning out chips for some of the biggest names in tech, including Apple, without wanting the spotlight for itself. What TSMC lacked in name recognition, it made up for in ubiquitous reach. It is now Asia’s most valuable company by market capitalization and the world’s largest foundry.
Based on the same foundry business model that Chang pioneered, Taiwan eventually built itself into a silicon island just as it made the transition into a vibrant democracy.
Investors seeking rich rewards today would not consider contract chip manufacturing a hugely profitable business. It requires heavy and constant investment in the relentless pursuit of the next technological breakthrough. Also, coming late into the game, they would face high entry barriers and a high investment threshold.
“For American investors like [Warren] Buffett, it has not been an ideal target. The foundry is labor intensive and capital intensive. And clearly the risk profile of today’s environment was not the right fit for Buffett’s style of investing,” says Counterpoint’s Wang. He is referring to billionaire Warren Buffett’s abrupt reversal in unloading $4 billion worth of TSMC stock early this year, only months after buying it.
Chipmaking is labor intensive in that engineers need to keep a close watch on the intricate manufacturing process, working overtime and always on call, Wang notes.
The long stretch of heavy investment has worked on widening TSMC’s technology lead on the competition; it maintains a stranglehold on 90% of the world’s advanced chips, wherein transistors are etched down to 5-nanometer or smaller. That’s smaller than viruses.
“TSMC has the pricing power; in the short term, we do not see any competitors catching up,” Wang says.
There are other local families with traditional wealth that jumped on the tech bandwagon early, whose tech startups now rank among the industry’s top ten.
Realtek, Taiwan’s second-largest chip design firm, is controlled by founder and former chairman Yeh Nan-Horng’s family through privately held Cotek Pharmaceutical.
Likewise, Winbond Electronics, a manufacturer of the DRAM memory chips, is controlled by the family of Arthur Yu-Cheng Chiao, company chairman and CEO. Chiao has served in the same role since 1987. Chiao’s family business is anchored by Walsin Lihwa, a wire and cable manufacturer in Taiwan with a market cap of almost $5 billion.
These Taiwanese tycoons have been surprisingly successful. Most of their ventures remain small and little-known, yet they provide outsized returns. It’s all thanks to their visionary founders, who saw an electronics surge and predicted, correctly, a semiconductor tsunami.