Tsao Hsing-cheng: From Wafer-Foundry Tycoon to Taiwan's "Eight-Nots" Defender Against China

30-second overview: Tsao Hsing-cheng (曹興誠) is one of the founding figures of Taiwan's semiconductor industry. The company he founded, UMC (United Microelectronics Corporation), was once paired with TSMC as the "Two Giants of Wafer Foundry." His life is full of reversals: he once advocated investing in China and pushed for a "unification referendum"; in his later years he became Taiwan's most aggressive anti-CCP defender, even donating NT$3 billion to civil defense. This isn't only an entrepreneur's story — it is one of the sharpest soul pivots ever made by a Taiwanese elite confronting geopolitical threat and commercial reality.

The wafer-foundry origin dispute: who thought of it first?

"I thought of wafer foundry first, but when I told Morris Chang, he ignored me."¹

The line comes from UMC founder Tsao Hsing-cheng, and it captures Taiwan's most famous "wafer-foundry origination" dispute. In 1984, then-UMC CEO Tsao reportedly had a friend deliver a proposal to Morris Chang, who was still working at General Instrument in the United States, suggesting that UMC pivot to a "pure wafer foundry" business model. According to Tsao, Chang's response at the time was, "That's hard to do."² Three years later, however, Chang returned to Taiwan to found Taiwan Semiconductor Manufacturing Company (TSMC) — and the model he adopted was precisely this dedicated wafer foundry model, which, with strong government backing, he carried to global dominance³.

Chang's side has documents suggesting he had already been thinking about a dedicated wafer foundry model before returning to Taiwan⁴. This "who originated it" dispute opened decades of competition between Taiwan's "Two Wafer Giants." Tsao Hsing-cheng and Morris Chang, two leaders of starkly different temperament, fought not only on technology and markets but also through contrasting management philosophies: Chang excelled with steadiness, discipline, and vertical integration, while Tsao was known for nimble, aggressive strategic thinking and financial leverage⁵. The dispute was not visibly defused until 2020, when the two shook hands publicly in what was called the "century handshake" — widely read as the breaking of the ice⁶.

The joint-venture model: UMC's "wolf-pack tactic" and its costs

Facing TSMC, which had vastly more resources, Tsao unleashed in 1995 the industry-shocking "joint-venture model." Instead of fighting alone, he teamed up with US and Canadian IC design houses to co-found a series of 8-inch wafer foundries: UICC, USC, UJC, and others. UMC contributed about 35% of the capital and obtained another 15% by valuing in its technology; the remainder was put up by the customers (the IC design firms). This "build factories with the customers' money" strategy let UMC scale capacity rapidly, at one point closing in on TSMC's capacity⁷. In 2000, UMC went further with a "five-into-one" mega-merger, consolidating four wafer foundries in the group into a single company. Market share jumped from 10% to 35%, with capacity reaching 85% of TSMC's⁸.

📝 Curator's note: UMC's joint-venture model is a textbook case of a Taiwanese entrepreneur using a creative business model to challenge an industry leader from a position of resource disadvantage. It showed off the agility characteristic of Taiwanese entrepreneurs — but it also planted the seeds of later trouble.

The model carried structural flaws. Because customers were simultaneously shareholders and potential competitors, the customer base was largely confined to small and mid-sized design houses; large customers stayed away, fearing technology leakage. Internally, resources were dispersed and R&D struggled to focus, so UMC fell behind TSMC in catching up on key process nodes such as 0.13 micron, eventually slipping from "Two Giants" to third place globally⁹. That said, UMC's later spinoffs of its IC design divisions gave birth to companies like MediaTek and Novatek — the so-called "UMC family" — which remain core forces in Taiwan's IC design industry today, another strategic legacy of the UMC model¹⁰.

The He Jian case and the China setback: from "red-capped merchant" to "I wish I hadn't"

Tsao's "180-degree turn" in political stance is inseparable from UMC's setbacks investing in China — especially the He Jian case. In the 2000s, Tsao was a staunch advocate of cross-strait economic cooperation; Chinese state media even hailed him as a "red-capped merchant"¹¹. But in 2001, UMC, through its subsidiary UMC Japan, invested in China's He Jian Technology and built an 8-inch wafer fab in Suzhou. The move violated Taiwan's then-existing ban on semiconductor investment in China, triggering a years-long judicial investigation¹².

Tsao saw the case as "judicial persecution," and in 2011 he angrily naturalized as a Singaporean citizen, renouncing his Republic of China nationality¹³. The He Jian case ultimately ended in 2010 with UMC settling with prosecutors, paying NT$500 million as a public-interest donation, and Tsao and others receiving a non-prosecution or acquittal verdict¹⁴. But commercial reality proved harsher than the legal verdict. UMC's investments in China generally lost money. The He Jian case involved technology-transfer controversies, and UMC's China operations "only lost money, never made money." Tsao later said publicly: "If I could do it over, I'd hope I had never set up a fab on the mainland."¹⁵ UMC's later investments in places like Xiamen United Semiconductor (Lianxin) also incurred massive losses; some analysts see these commercial setbacks as one of the realist factors behind his pivot from "westward investment" to anti-CCP, rather than purely the influence of the 2019 Hong Kong protests¹⁶.

From "unification referendum" to "defend Taiwan against the CCP": a violent pivot

Before the He Jian case, Tsao's political stance leaned toward reconciliation with China. In 2008, he ran ads in major newspapers advocating a "Cross-Strait Peaceful Coexistence Act" and pushing for a "unification referendum," arguing that Taiwan should not reject unification but must let voters decide, and criticizing "de jure independence" as a path to war. Former president Chen Shui-bian called this proposal "Taiwan's surrender act."¹⁷

But after Hong Kong's 2019 anti-extradition protests, everything changed. Tsao watched "one country, two systems" collapse, and began publicly calling the Chinese Communist Party a "criminal syndicate."¹⁸

"I've seen how the Communist Party treated Hong Kong. I know Taiwan cannot go down that road."¹⁸

In August 2022, when US House Speaker Nancy Pelosi visited Taiwan and the PLA launched encirclement drills, Tsao announced he would donate NT$3 billion (roughly US$100 million) to support Taiwan's national defense, and reapplied for ROC citizenship¹⁹. He appeared in front of cameras in body armor, declaring he would train 3 million "Black Bear Warriors" and 300,000 "Hometown Sharpshooters."²⁰ The donation was directed mainly at countering the CCP's "cognitive warfare," psychological operations, and propaganda warfare, and went to civil-defense organizations like Kuma Academy (Black Bear Academy), aiming to wake up the fighting spirit of the Taiwanese public²¹. Former president Chen Shui-bian even called Tsao "the new father of Taiwanese independence."²²

📝 Curator's note: Tsao's transformation isn't only a personal political reversal — it reflects the broader collective psychology of Taiwanese society, which, faced with the China threat, has shifted from economic dependence to a security-conscious awakening.

Controversies and afterlives: the true face of the "Eight-Nots Hermit"

Tsao styles himself the "Eight-Nots Hermit" (八不居士) — among them, "neither big nor small entrepreneur, neither many nor few collector." He is also a legend in the art auction world, having sold a Northern Song-era Ru ware sky-blue glazed brush washer for NT$1.1 billion, setting a record for porcelain auctions²³.

Yet the controversies have never stopped. Since announcing the donation, outside observers (including some Pan-Blue legislators and public figures) have repeatedly questioned how much of the NT$3 billion was actually delivered, and how the money was spent²⁴. Kuma Academy, one of the recipients, has also come under scrutiny over its funding sources and operating model, with some asking, "Why does it need public funds, then?"²⁵ Tsao's response has been blunt: "The donation is meant for fighting cognitive warfare and waking up the fighting spirit of the Taiwanese — there's no need to make every line item public."²¹ He has also stressed that Kuma Academy has not received a single cent of government budget, that all funding comes from him personally, and called those questioning him "Communist bandits."²⁶ These controversies highlight the executional transparency challenges of his giving, and remain a recurring focus of public attention.

Today's Tsao is still the same unconventional strategist. He went from being an overlord of the wafer-foundry battlefield to a guardian of Taiwan's democracy through civil defense. Whether or not you agree with his political views, you cannot deny his enormous impact on Taiwanese society. He has shown with his life that, in an era of upheaval, the most essential competitive edge is not preserving what one has built but the courage to overturn one's past self at any moment.

References: