Mon, Jun 15, 2009 - Page 12 News List

ANALYSIS: TSMC leadership change fuels questions about future

SEMICONDUCTOR SHUFFLE The microchip industry is abuzz over the surprise move in which Morris Chang was appointed to take over from his right-hand man Rick Tsai

By Kevin Chen  /  STAFF REPORTER

A picture of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) leaving his seat at the end of a press conference last week while his right-hand man Rick Tsai (蔡力行) proceeded in the opposite direction has prompted many people to wonder if their partnership was over.

That may not be the case at the moment for the two TSMC heavyweights, but it has certainly raised concern about the company’s long-term succession plan, analysts said.

On Thursday evening, Chang unexpectedly announced that the board of directors had appointed him to replace Tsai as chief executive officer, while Tsai was charged with developing green energy business.

The new appointments took effect immediately. Chang retains his position as chairman.

Tsai was appointed TSMC president in 2001 and became CEO in 2005. He has been with the company for 20 years since Chang wooed him away from Hewlett-Packard Co in 1989.

Although few doubt Chang’s ability to run the biggest contract chipmaker in the world, given his past track record and the company’s well-established organizational structure, his displacement of Tsai came as a surprise to many, prompting speculation about the reasons behind the move.

At the press conference, Chang stressed that the appointment of Tsai to lead the new business division in developing solar cells and light-emitting-diode (LED) products was imperative if TSMC is to maintain growth momentum.

He rejected speculation that the management change had anything to do with employee layoffs over the past few months.

Speculation nonetheless remained rife, especially since Tsai, 58, had helped maintain TSMC’s market leadership and profitability during his stint as CEO and was the only Taiwanese on Barron’s magazine’s list of the 30 most respected CEOs this year.

TSMC has long been viewed as a company that is focused on “stability in self-dependent development and in business focus,” authors Liu Tzu-hsin (劉子歆), Chu Yee-yeen (朱詣尹) and Hung Shih-chang (洪世章) wrote in their 2004 research study “Technology entrepreneurial styles: a comparison of UMC and TSMC.”

TSMC’s arch-rival, United Microelectronics Corp (聯電), is best known for its quick responses toward “organizational networks and business diversification,” the study said.

This is arguably a direction TSMC is now moving toward.

“I think the laying off and ­rehiring of the same employees in a short span is one of the issues. I reckon Morris Chang briefly apologized about this issue a few weeks ago,” Pranab Kumar Sarmah, an analyst at Daiwa Institute of Research (Hong Kong) Ltd, said in an e-mail to the Taipei Times on Saturday.

Sarmah was referring to a televised speech Chang gave on May 20, in which Chang told employees that the company would welcome all of its laid-off workers back on June 1. Chang also apologized for what he said had been the company’s mishandling of its annual employee appraisals, which formed the basis of the layoffs.

In a report issued on March 23 under the title “Kings of the Jungle,” Barron’s described Tsai as “a quieter, calmer executive than Chang.”

The report also praised Tsai for helping boost TSMC’s revenue by 25 percent to US$10 billion since 2005 and, most importantly, for having reached a deal with Intel Corp in March to make the popular Atom processors.

Despite all this, Sarmah said he was surprised by Tsai’s “demotion,” adding that he believed the layoff issue had affected TSMC’s reputation in Taiwan significantly.

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