Taiwan's New Tech Dreams

At the depth of the global economic crisis, Taiwan Semiconductor Manufacturing Co. (TSM) was in trouble. With factories operating at just a fraction of capacity, Morris Chang—TSMC's silver-haired founder—laid off hundreds of staffers, ordered the remaining workers to take unpaid leave, and took other cost-cutting steps such as dimming the lights in hallways. "It was terrible," Chang says in his office on the eighth floor of "Fab 12," a vast facility that serves as TSMC's headquarters.

These days, things look far better. TSMC's plants are humming again, and its Taipei-listed shares are up 41% this year. But Chang is chastened. The era of easy double-digit growth for chipmakers "isn't there anymore," he says, taking a puff on his ever-present pipe. "We need to find new areas." TSMC is stuck in a maturing industry, and its primary business of making chips for other companies is likely to grow just 8% annually in coming years. So Chang wants to boost TSMC's presence in solar power and light-emitting diodes (LEDs). The two have technological overlap with chip production, but they offer far better margins and more potential. "They are going to be fast-growth industries," Chang says.