TSMC Founder Morris Chang

The conversation opens with the 1997 letter that brought Jensen Huang and Morris Chang together. NVIDIA was a small, financially strained company looking for a foundry after it had received no answer from TSMC's San Jose office. Chang was irritated that a potential customer had been neglected, especially because he had told sales teams not to dismiss small companies. At that time TSMC already had thousands of employees and more than $1 billion in annual revenue, while NVIDIA reportedly had only 50–60 employees and was near bankruptcy.

Chang says the first meeting left him impressed by Huang's clarity, optimism, and frankness. Huang argued that a promising game chip could save NVIDIA and eventually make it a major TSMC customer. The prediction proved consequential: within two or three years NVIDIA became one of TSMC's five largest customers. The partnership established a division of labor that continues at much larger scale: NVIDIA designs chips, while TSMC manufactures them.

The relationship faced a major test at the 40-nanometer node in 2009. Development lagged, yields and quality were disputed, and NVIDIA—then one of the node's largest customers—was bearing much of the damage. Chang says the CEO and quality team initially maintained that TSMC was not at fault and offered no compensation. As the problem continued, Chang became impatient and returned to the CEO role; he then contacted major customers, including Huang, and made resolving NVIDIA's concerns a priority.

Another pressure was that prices were falling faster than manufacturing costs, compressing gross margins. The discussion links the pricing problem to a difficult year for the semiconductor business and to a different management decision: Chang's predecessor laid off 600–700 employees using poor performance reviews as the stated basis. Chang objected, arguing that those ratings were subjective and that performance evaluations should not become a way to select people for layoffs.

Chang's objection was based on both fairness and operating cost. He argued that performance ratings depend on individual supervisors and are therefore subjective. He also reasoned that if the company needed to rehire laid-off employees within a year, layoffs would be wasteful: severance could cost about half a year's salary, and training a replacement would take at least another six months. His alternative was probation, reassignment, and giving employees a chance to return to their previous role.

The layoffs brought the disagreement home: hundreds of employees protested outside Chang's residence, and the police were notified in advance. When a smaller group returned and spent the night in a nearby park, Chang's wife brought them breakfast. The episode ends this section with an unusually personal account of leadership—workers were not just names on a performance list, but people whose livelihoods and trust were tied to the company's decisions. Chang says the episode helped precipitate his return to the CEO role.