TSMC CEO Chang Hands Over Post to COO and Senior VP

The global IC market was not shocked by Taiwan Semiconductor Manufacturing Co.'s (TSMC's) Nov. 12 announcement that the company's board of directors approved promoting Mark Liu and C.C. Wei, both incumbent TSMC Co-Operating Officer (COO) and Senior Vice President, as the company's president and co-chief executive officer.

Industry executives say that the announcement was not out of the blue. Only a few days ago at a corporate sports meet, Morris Chang, current CEO and chairman, said he could hand over the CEO position “tomorrow or by June next year.” Both Liu and Wei are regarded as likely candidates for the CEO position for Liu was the engineer behind TSMC's success in improving 40-nanometer process yield rate, while Wei helped to land contracts from fabless heavyweights Nvidia and Qualcomm. Chang remains in charge as the executive chairman after passing CEO post to Liu and Wei, who will still report to Chang.

In June 2009 Chang was reassigned by the company's board of directors as CEO of the world's No.1 silicon foundry, which surprised most foreign institutional investors and made them wonder if something was amiss. They oversold 48.7 million TSMC shares on the day following the announcement.

Industry executives felt that Chang retook the CEO post from Eric Tsai, who succeeded Chang as CEO in 2005, because Tsai had made several mistakes. He was blamed for laying off hundreds of underperforming employees, lost ground to No. 2 player UMC and No. 3 producer Semiconductor Manufacturing International Corp. (SMIC) in the 0.13-micron foundry business, and failed to bring the 40mn process into commercial production as scheduled. Also, some blamed Tsai for failing to keep the company's revenue growing at high rate. For instance, in 2008, the company's annual revenue growth rate slowed to 3.3%, from a high of 26.8% in 2004.

Some institutional investors told their clients that Chang believed TSMC was still in rough water and that Tsai was incapable of coping despite the fact that Barron's listed Tsai as one of the 30 most respected CEOs in the world. Others felt the move reflected concerns about the future profitability of the chip foundry industry.

Despite the downbeat stock market projection after the 2009 change of TSMC's top management, the company's share price still rose NT$0.5 to NT$105 (US$3.5) per share on the same day of the Nov. 12 personnel announcement.

Challenges Ahead

Industry executives think that Wei and Liu face the challenge of keeping the company's revenue and earnings growing at high rates, TSMC's high market share of advanced processing technologies, and Chang's tough leadership style in the company's R&D division. The two new executives will also take over Chang's helm of the company's R&D team of some 7,000-8,000 personnel.

They note that TSMC's earnings have substantially increased at annual rate of 7.7% on average over the past four and a half years beginning 2009, when Chang retook the CEO post. Chang has publicly announced that the company's revenue and earnings will persistently set new highs over the next two years.

Amid intensifying competition from Intel and Samsung in the foundry market, the two co-CEOs will not only have to retain current customers but also bring in new contracts. TSMC leads all foundry competitors in supply of 28nm processing technology and is the exclusive supplier of commercial 20nm processing technology, also vigorously developing 16nm process, which Samsung is also pursuing.