Return to 1958 and build a century-old giant

Chapter 906 TSMC Investing in the Future
Platforms and content are complementary to a certain extent. The more third-party content there is, especially high-quality content, the more stable the platform's dominant position can be. In turn, the platform's dominant position can bring higher revenue to content creators. Ultimately, the two are tied together.
This is a balance scale; if either side becomes unbalanced, it will lead to systemic disaster.
Therefore, we should be generous when it's appropriate. When creators receive sufficient compensation, they will be more motivated to create new content, thereby generating more revenue for the platform.

More importantly, there are many other benefits besides the content itself;
Many internet platforms in the past were like this; some even achieved a monopoly. However, the greed that followed the monopoly allowed them to reap huge profits, while also creating opportunities for other competitors to enter the market.
In theory, if a platform imitates Coca-Cola's model and maintains its minimum profit margin, its monopoly position will be almost permanent. However, in reality, too many people are too greedy. Once they gain a dominant position, they start to exploit others in every way, like Meituan.
Of course, that's all for the future. We'll see what the future holds when we get there.

The home video game console industry will eventually be replaced by computer games and online games. It would be quite an achievement if we could control this market for more than ten years.

On September 19, Yang Wendong met with a Chinese man in a coffee shop on the rooftop of the Four Seasons Hotel in Los Angeles.

"Mr. Zhang, please have a seat." Yang Wendong said politely, "I have heard of Mr. Zhang's great name in Silicon Valley for a long time. It is great to finally meet you today."

The person who came was Zhang Zhongmou, the first Chinese vice president in the history of Texas Instruments, and the founder of TSMC in the future.
Historically, this person returned to Taiwan's industry in 1987 and built what will become the world's largest chip foundry giant.

But in fact, Taiwan had already contacted him in the early 80s, but they couldn't reach an agreement on the terms for various reasons.
In this life, because of Yang Wendong's existence, Wanwan has been affected by many orders from Glory Electronics, which is very different from the original history. Zhang Zhongmou is not sure whether he will return to start his own business in advance.

Therefore, he took advantage of his trip to Los Angeles to make contact. If he succeeded, great; if he failed, he wouldn't lose anything. Moreover, after the meeting, even if Zhang Zhongmou returned to Taiwan's industries in the future, he might consider investing in him.

"Mr. Yang, you're too kind. My reputation is nothing compared to yours." Zhang Zhongmou seemed somewhat flattered. After sitting down, he asked, "Mr. Yang, may I ask what brings you here?"

"I heard that Mr. Zhang is planning to start a business in Taiwan?" Yang Wendong asked.

Zhang Zhongmou was taken aback for a moment, then said, "I didn't expect Mr. Yang to know about such things. Impressive. That's right, I did have this plan. Although I have reached the position of vice president at Texas Instruments over the years, I have been ostracized by many parties because of my Chinese identity. Even without these circumstances, I would not have been able to advance any further."

“For a Chinese person to reach the position of vice president in an American company, especially a large company like Texas Instruments, is already the limit, or even a miracle,” Yang Wendong said. “If Mr. Zhang hadn’t been very capable, he would never have had such an opportunity.”

In its previous life, Silicon Valley's major corporations were dominated by Indians for a period of time. The fundamental reason was that after the decline of white Americans, and because of the University of Tokyo, they dared not give important positions to Chinese people, so they could only choose Indians; and then Silicon Valley was occupied by Indians.
In the 1970s and 80s, before the rise of the University of Tokyo, the situation was a little better. However, the white population was still very strong at that time. Not only Chinese Americans, but other races were also excluded. It can be said that those other races who were able to make it to the top of the American employment pyramid in that era were the elite of the elite.

Zhang Zhongmou's career at Texas Instruments is considered legendary. Due to his outstanding abilities, Texas Instruments even allowed him to take a break from work to pursue a doctorate at Stanford University, paying his full salary plus tuition in exchange for a five-year contract with Texas Instruments after graduation. Such treatment is rare among American companies.

Of course, the five-year period has now come to an end.

Zhang Zhongmou nodded and said, "Yes, Texas Instruments is a top IT company in the United States. I doubt the White House would agree to me becoming CEO."
Taiwanese government officials did contact me, but due to various factors, the talks haven't gone well.

"The terms are negotiable; if they can't agree to something, I can consider it," Yang Wendong replied.

Zhang Zhongmou thought for a moment and said, "Mr. Yang, do you want me to join your company?"

Yang Wendong shook his head and said, "Pretty much, but I will set up a separate company with you. We can discuss the shares and such. Then we will do what you do best: chip manufacturing."

At Texas Instruments, Zhang Zhongmou was in charge of chip hardware production. In the future, when he founded TSMC, he will be in the same industry.

Zhang Zhongmou asked, "Will the production be made exclusively for Honor Electronics from now on?"

Yang Wendong said: "Not only that, I hope that our joint venture can operate independently in the future, specializing in undertaking chip foundry business from all over the world."

You've been in Silicon Valley for many years, so you should have noticed this problem too: too many IT companies have their own factories, and as a result, with very few exceptions, most are operating at a loss because they simply don't have that many orders.

“Yes, even Texas Instruments is the same,” Zhang Zhongmou nodded and said.
Yang Wendong added: "In the early years, semiconductor equipment was not expensive. A wafer fab only cost a million or even hundreds of thousands of dollars. However, with the development of Moore's Law, chip manufacturing processes have become more and more precise, and the corresponding equipment has become more and more expensive."

Many small and medium-sized companies can no longer afford the price of such equipment and the high cost of vacancy. In addition, the pollution problem is also fatal.

Therefore, many companies are eager to outsource production, and this is my opportunity. However, I need someone like Mr. Zhang to manage this company.

Not to mention that semiconductor equipment is expensive, if there are no orders, the daily maintenance costs are also frighteningly high.
This applies to both chips and LCDs;
"As expected of Asia's number one entrepreneurial billionaire, Mr. Yang's vision is truly remarkable." Zhang Zhongmou exclaimed, "I did consider this market, but the costs were too high. Now, it seems that Mr. Yang and I have the same idea."

Yang Wendong laughed and said, "That would be even better. If we cooperate, you will be responsible for the technology and quality, and I will be responsible for the funding and market. We will each get what we want."

This industry is not like a game. Even if Yang Wendong has immense wealth, he cannot succeed without top-notch professional talent.

Even if it works today, it won't work in the future. Of all the companies in the world in the past, only two giants, Samsung and TSMC, were left in the end.

Zhang Zhongmou then asked, "Mr. Yang, are you planning to locate this contract manufacturing plant in Hong Kong?"

This approach would definitely not work in the United States. Although it is close to the market, the industrial costs are too high, and environmental regulations are very strict. At the same time, labor unions would be a huge problem. Zhang Zhongmou, as the vice president of Texas Instruments, has also witnessed the power of labor unions.

At the same time, chips are small and valuable, so even if they were all airlifted, the cost would not be much higher than the value.

Yang Wendong shook his head and said, "I don't plan to place it in Hong Kong. Hong Kong is short of water and there are other unstable factors. Let's place it in Taiwan. There are more electronics-related talents there than in Hong Kong."

Although he wanted to place it in Hong Kong, the future global political landscape destined it to fail. Forcing it in Hong Kong would only lead to its deliberate marginalization by Western countries, who might even enact laws to prevent Hong Kong from developing its semiconductor industry. Moreover, Hong Kong's property market is currently insane. Even if things calmed down a bit in 83/84, the next 12 years after 85 would only be more frenzied than today, leaving virtually no chance for manufacturing in Hong Kong.

In addition, water shortage is also a problem. Although Hong Kong is no longer short of water on the surface due to water supply from the mainland, semiconductor production consumes too much water. If it were located in Hong Kong, there would definitely not be enough water, and it would even compete with the local people for water.

For various reasons, it's impossible to run a semiconductor business in Hong Kong, at least not for large semiconductor giants. Smaller companies might be a little more feasible, but it wouldn't make much sense.

Zhang Zhongmou said, "I have also investigated Taiwan. Like Hong Kong, it is located in an area with high rainfall, but it cannot retain water."

"That's simple. When we're small, we don't need to worry about this. When we're large, we'll build a reservoir. When that day comes, the money spent on the reservoir won't be much," Yang Wendong said nonchalantly.

Some parts of Taiwan are also experiencing water shortages, but not as severe as in Hong Kong.

No place is perfect. In the future, Taiwan's political environment, the work ability of the Chinese community, and a large number of electronics talents will be even more important.

Zhang Zhongmou nodded and said, "Indeed, we don't need to consider that question for now. I'd like to know, what are Mr. Yang's goals in establishing this company?"

"If I said I wanted to beat the Japanese industry, would you think I was crazy?" Yang Wendong asked with a smile.

In recent years, various Japanese industries have been making waves in the United States, including the semiconductor industry. Giants like Intel are facing competition from Japanese counterparts for market share and are on the verge of complaining to the White House.

Zhang Zhongmou's expression changed, and he said, "Mr. Yang is truly ambitious."

“It’s not absolutely impossible,” Yang Wendong said. “One of the main reasons why Japanese semiconductors have been successful is that their employees work incredibly hard. This is something that is impossible in Europe and America, but it is possible in Taiwan.”

The global shift of industrialization is partly due to labor costs, but another important reason is the work attitude of employees.

In the early days, around the 1900s, British workers were incredibly hardworking; even young children could go down chimneys, and working ten or more hours a day was common. Americans were similarly hardworking.
After several generations of economic development, not many people were willing to work in manufacturing, and even if they did, they were not as enthusiastic.

At this time, Japan was like Britain and the United States decades ago, fiercely competing with each other, not only with workers but also with engineers, which naturally made their European and American counterparts run for their lives.

Similarly, the University of Tokyo in the coming decades will follow the same path;

Human history is essentially a constant repetition. Fortunately, decades later we have entered the era of AI robots. This technological breakthrough may end this cycle. In the future, Tokyo University is also trying to use this technology, along with lower energy costs and the construction of canals across the country, to completely preserve the manufacturing industry.

Zhang Zhongmou nodded and said, "Yes, I've been to many factories in Taiwan. The people there are no less capable than those in Japanese factories."

"This is the third element we need," Yang Wendong continued.

His funds, Zhang Zhongmou's abilities, and a large number of hardworking and dedicated workers and engineers—none of these can be lacking.

Zhang Zhongmou asked, "How much capital can Mr. Yang invest?"

Yang Wendong said, "There are no restrictions. As long as your investment plan is reasonable, I will give you as much as you want. Of course, since the new company is just starting out, we can't invest hundreds of millions of dollars immediately. We have to take it one step at a time."

Zhang Zhongmou was also taken aback, and then asked, "In that case, how will our shareholding ratio be confirmed? If we make further investments, my shares will probably be diluted significantly, right?"

“That is indeed a problem.” Yang Wendong thought for a moment and said, “Then let’s discuss a reasonable ratio first, and then if we need funds later, we can get financing from the bank.”

I have a bank in Hong Kong, or I can provide guarantees from other banks, but all of this must be done according to market rules. At most, I can offer the joint venture some preferential treatment. You still need to operate the business diligently and make it profitable on its own to protect your own equity.

When it's time to be greedy, Yang Wendong won't hold back; but when it's not time to be greedy, Yang Wendong won't be stingy either.

Zhang Zhongmou is now the vice president of Texas Instruments, a very high-ranking position. If he were to start over, he would definitely want shares in the company. He can't just come out and work for Yang Wendong. If that's the case, he would at least have to be the CEO of Honor.

Clearly, this is not what Zhang Zhongmou needs, nor what Yang Wendong can provide. What he needs is a top-tier chip foundry.

If you want Zhang Zhongmou to seriously grow this company, then the shares offered must be substantial.

“Okay, that’s a good idea.” Zhang Zhongmou thought for a moment and then said, “There’s another problem. If this company grows bigger in the future and its business really covers many customers in Europe and America, then it will be necessary to introduce more European and American capital.”

Yang Wendong said, "Don't worry, I'm also a person who plays the capital game, so I know these rules. When the scale gets bigger in the future, we will introduce American capital, and we may even need to bring in the Taiwanese government. But for now, just you and me are enough."

If the scale becomes large, then it is natural to introduce capital from multiple parties, especially in sensitive industries. This is necessary in a capitalist society. Only through cooperation among multiple capital groups can a company truly grow into a global giant.

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(End of this chapter)