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How a small Taiwanese city transformed the global chip industry

Hsinchu marks its 40th anniversary as a high-tech hub

Industry heavyweights, including longtime rivals Morris Chang, second from left, and Bob Tsao, second from right, attend an event marking the 40th anniversary of Hsinchu Science Park on Dec. 15. (Photo by Cheng Ting-Fang)

HSINCHU, Taiwan -- When Hsieh Chi-chia returned from the U.S. nearly 40 years ago to start a satellite parts company in the northern Taiwanese city of Hsinchu, he wondered at first if he had made a mistake.

The government had recently established the Hsinchu Science Park as a special industrial zone to attract high-tech industry and create a "Silicon Valley of Taiwan." But there were problems.

"Can you imagine? You could see snakes in the dormitories of the science park and if you tried to shoot a film here, the only thing you could see were flies," said Hsieh, the co-founder and now honorary chairman of Microelectronics Technology. "The school here could not find enough students. Really, no one wanted to live here when I got here."

It was a rocky start for such a vital government project, but Hsieh, like others, now looks back on the past four decades with pride.

"My peers and I once wondered and doubted if we were right to come back from the U.S. to start companies here, and if it was going to work," Hsieh said. "But now we are very proud to be part of the technology development."

On Tuesday, Taiwan's tech industry came together to share that sense of pride at an event marking the 40th anniversary of Hsinchu Science Park.

The special high-tech zone was established by government officials to lure world-class talent to what was then a poor tropical island. At the time, many engineers with Taiwanese connections were living and working in the U.S., and when the government called on them to help build up the domestic industry, they came.

The most prominent was Morris Chang, who, after a long career in the U.S. chip industry, came to Taiwan in 1985. Two years later, he founded Taiwan Semiconductor Manufacturing Co., now the world's most valuable chip company.

Former and current officials of the Hsinchu Science Park Administration gather the to mark the 40th anniversary of the special industrial zone. (Photo by Cheng Ting-Fang)

Speaking at Tuesday's event, Chang hailed Hsinchu Science Park as "one of the most important elements and ingredients to the great success of Taiwan's tech and chip industry. If it were not for the science parks that offer all the infrastructure and land, a lot of tech companies may not be possible today."

The industrial park in Hsinchu -- pronounced Chu Ker in Chinese -- has become synonymous with Taiwan's flagship semiconductor industry, which ranks second only to the U.S. by revenue and serves almost all of the world's tech giants, including Apple, Google, Qualcomm and Nvidia. The chip industry is even widely credited as the key reason the island's economy has outperformed those of Japan, South Korea and Singapore during the coronavirus pandemic.

According to Wayne Wang, director-general of the science ministry's Hsinchu Science Park Bureau, the special zone is on track to generate some 1.2 trillion New Taiwan dollars ($42.63 billion) this year, the highest in its history.

Such a forecast is perhaps not surprising considering how many tech giants Taiwan can lay claim to.

In addition to TSMC, Hsinchu is also home to MediaTek, the world's second-largest mobile chip developer, and United Microelectronics Corp., Taiwan's first homegrown chip producer and the world's third-largest contract chipmaker. Computer maker Acer also set up a factory in Hsinchu, once a town renowned for its tea farms, in 1981. 

The strong performance of its tech sector also highlights Taiwan's strategic position in the U.S.-China tech war. As Washington and Beijing attempt to untangle their supply chains, the island is becoming increasingly important as an alternative production base.

TSMC Chairman Mark Liu, speaking at Tuesday's event, said: "Taiwan's importance is really highlighted and elevated during these radical changes. ... The world is seeing Taiwan's significance as we have proven to the world that many Taiwanese companies are really the indispensable part of the global supply chain."

In addition to driving Taiwan's transformation into a global tech powerhouse, Hsinchu has also fueled the island's economic growth. Companies registered in the Hsinchu Science Park generated a combined 1.091 trillion New Taiwan dollars in 2019, around 6% of Taiwan's total gross domestic product and nearly 12% of the trade-reliant island's exports. About 152,250 people worked in Hsinchu Science Park -- less than 1% of the Taiwanese population -- in 2019.

TSMC is building a research and development center in Hsinchu, the heart of Taiwan's chip industry. (Photo by Cheng Ting-Fang)

Taiwan's gross domestic product surged more than 13 times to $612.1 billion in 2019 from $42.29 billion in 1980. Per capita gross national income jumped more than tenfold over the same period.

Two other science parks in the central and southern cities of Taichung and Tainan hope to replicate Hsinchu's success. The three high-tech parks, which serve Taiwan's flagship chip and display industries, generated a total NT$2.632 trillion in 2019 and contributed around 14% of Taiwan's GDP. Of that, 65% was from semiconductors.

In Hsinchu, meanwhile, the success of Taiwan's tech sector has transformed the city itself.

"Many of Taiwan's richest villages and neighborhoods with highest average incomes surround Hsinchu Science Park. The most competitive high school is also inside the high-tech zone, a place where four decades ago no one wanted to live and no one expected it to succeed," United Microelectronics honorary Vice Chairman John Hsuan said at an event on Monday.

Not bad for a place once known more for more snakes than semiconductors.

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