Beginning of the semiconductor revolution in Taiwan and Asia

Two top executives of the US Texas Instruments Company—Mark Shepherd and Maurice Chang—flew to Taiwan in 1968. Their goal was to find a suitable location for a new factory for chip assembly.

Their meeting with Taiwan's then Finance Minister, K. T. Lee, was not a smooth one. Minister Lee described intellectual property laws as a subtle trick by rich countries to subdue poor countries. But Taiwan had two obvious problems at the time—employment and national security. Minister Lee quickly realized that these dual problems could be solved by forming a partnership with a large American company like Texas Instruments.

At that time, America was on the verge of defeat in the Vietnam War, so their support for allies like Taiwan was shaky. On the other hand, Taiwan was trembling with fear of China, which had just tested nuclear weapons. In such a situation, establishing strong relations with the United States became essential for Taiwan. Minister Lee drew a far-reaching plan—Taiwan had to be an integral part of the American economy, and semiconductors would be the gateway to fulfilling that dream. Taiwan had skilled engineers, low wages for workers, and an irresistible desire for technological progress.

Morris Chang was able to convince Texas Instruments to set up a plant in Taiwan. Although Morris was born in China, it was his first visit to Taiwan. Two of his Taiwanese friends at Stanford University convinced him that Taiwan was a wonderful place for business. Meanwhile, Minister Lee also began to change his mind about Texas Instruments. He realized that a chip factory could revolutionize Taiwan's economy and technology.

In July 1968, Texas Instruments made the final decision to set up a factory in Taiwan. The factory opened in August 1969, just one year later. By 1980, they had reached an unimaginable milestone of producing one billion chips.

Taiwan's dazzling success sparked hopes in other Asian countries like Singapore, Malaysia, South Korea, and the Philippines. They were also eager to welcome chip companies into their countries, as they also had to create jobs. At the time, Singapore's undisputed leader, Lee Kuan Yew, was working tirelessly to increase his country's exports and reduce unemployment. As a result, Texas Instruments and National Semiconductor quickly set up factories in Singapore.

By the late 1970s, thousands of workers from various Asian countries were working to produce chips for American companies. They left their agricultural jobs and started working in these factories for good wages, which also brought a kind of political stability to the region. By the early 1980s, the electronics sector accounted for more than 7 percent of Singapore’s gross domestic product (GDP), and accounted for a quarter of the country’s manufacturing jobs. The bulk of this came from the semiconductor industry.

In Malaysia, chip factories were also springing up in cities (Penang, Kuala Lumpur). Between 1970 and 1980, 15 percent of the country’s agricultural population moved to the cities, and these chip factories opened up new job opportunities for them. This reduced unemployment and created a new sense of stability in society.

Although the United States withdrew its troops from Vietnam, this new supply chain deepened its ties with Asia. Asian countries, instead of leaning towards communism, became more deeply involved economically with the United States.

In 1977, Mark Shepherd visited Taiwan again and met K. T. Lee. This time, Mark had a happy smile on his face. “Taiwan is at some risk, but its economic strength will overcome this risk,” he told Lee. “Texas Instruments will stay here and grow even bigger.” Texas Instruments still operates in Taiwan today. As a result, Taiwan has become an integral part of Silicon Valley and one of the world’s most important chip producers.

In today’s world, chips are not just a technological commodity, they are a key pillar of geopolitical strategy and state policy. Asia has gained a large number of jobs and cutting-edge technology from this industry. America has gained the opportunity to produce high-quality products cheaply. And Taiwan has gained an economic powerhouse that is playing an invaluable role in its national security.

(Adapted and abridged from Chapter 9 ('The Transistor Salesman') of Chris Miller's acclaimed book 'Chip War')