It was the first day after Lunar New Year in February 1974 when seven men gathered over breakfast at the Little Xin Xin Soy Milk stall in central Taipei and mapped out Taiwan's foray into semiconductor manufacturing.
In an anecdote that is now legendary, Pan Wen-yuan, a Chinese expatriate who was then a US-based research director at Radio Corporation of America (RCA), advised Sun Yun-suan, the minister for economic affairs, to develop integrated circuits. It would cost US$10 million (S$13.8 million) and four years for the technology to take root in Taiwan, Pan said.
The plan was approved and Taiwan managed to persuade RCA, then a dominant electronics company in the US, to agree in 1976 to transfer semiconductor technology. That April, the first batch of engineers were sent to RCA's facilities for a year of intensive on-the-job training in various functions from design, process, manufacturing to equipment.
Billionaire Tsai Ming-kai, 69, chairman of smartphone chipmaker MediaTek, was one of the engineers who trained at RCA.
The inspiration and takeaway of RCA at that time was getting to know the core spirit of a technology-based operation, that is new products, new technology
- Tsai Ming-kai, chairman of smartphone chipmaker MediaTek
"We had a strong sense of mission and were passionate to learn as much as possible to bring the technology as pioneers for Taiwan," Tsai said in an interview with the South China Morning Post.
"No doubt for the brotherhood, that really brings back the old days when we were young. The inspiration and takeaway of RCA at that time was getting to know the core spirit of a technology-based operation, that is new products, new technology."
Fast-forward 43 years to the Steve Jobs Theatre in Cupertino, California, this week where Apple chief executive Tim Cook stood onstage to unveil the iPhone 11, featuring the "fastest ever" A13 Bionic processor made by Taiwan Semiconductor Manufacturing Co (TSMC).
Set up in 1987, TSMC is today the world's biggest contract chip manufacturer, accounting for about half of the market share among foundries producing chips that go into everything from the iPhone 11 to bitcoin-mining rigs. TSMC is the first foundry to provide 7-nanometre production capabilities (one nanometre is one-billionth of a metre).
Semiconductors have become the cornerstone technology of the information age and these tiny devices power the world's modern economies by serving as the data-processing brains in a wide range of products, from personal computers and smartphones to cars and spacecraft.
So that breakfast meeting in the 1970s in Taipei now seems even more prescient, given the multibillion-dollar industry that has sprouted up to cram billions of transistors onto fingernail-sized chips.
Interviews with industry executives involved in the early days of Taiwan's semiconductor sector attribute the success to the interplay of top-down government planning, US technology transfer and the aggressive wooing of overseas-trained talent.
Taiwan finds itself once again at a point of reinvention as the industry approaches the physical limits of Moore's Law (which observes that the number of transistors on a microchip doubles every two years) and as a new era of brain-like computers, artificial intelligence (AI) and Internet of Things (IoT) applications threatens to disrupt existing semiconductor technology.
The executives interviewed by the Post were unanimous that Taiwan would not have a semiconductor industry if not for the top-down direction by the government in the 1970s.
At that time, the local economy was suffering from the 1973 oil crisis, and the government under the leadership of Chiang Ching-kuo was seeking to make advances in science and technology to replace labour-intensive industry.
"The Taiwan government at that time fully supported the development of the semiconductor industry," said Wu Cheng-wen, a chair professor of National Tsing Hua University in Taiwan. "It was able to push for the things that it considered important, just like the mainland Chinese government does today."
One of the key initiatives was the setting up of the Industrial Technology Research Institute (ITRI) in 1973 to undertake applied research and provide technical help to the industry.
It was ITRI that signed the technology transfer deal with RCA and sent engineers to the US for training. They returned to work on an ITRI-built wafer fab that would eventually be spun off into United Microelectronics Corp (UMC) in 1980, Taiwan's first semiconductor company.
TSMC itself was founded by Morris Chang Chung-mou, a US-trained engineer and 25-year Texas Instruments veteran. Chang was persuaded to spearhead ITRI by then-economic affairs minister Sun, one of the original seven who gathered at the humble breakfast shop that chilly February morning in 1974.'PHOTO: Weibo/WeetieLuk
TSMC pioneered the pure-play foundry business model, which reshaped the semiconductor industry by freeing up companies to concentrate on chip design, leaving the capital-intensive business of production to contract manufacturers.
Others who left the US to join Taiwan's fledgeling semiconductor industry include Lin Burn-jeng, an IBM veteran who joined TSMC and is credited with groundbreaking work on immersion lithography technology that allowed the semiconductor industry to extend the limits of Moore's Law.
Also, Jackson Hu, former chief executive of UMC, who returned to Taiwan in 2002 after spending nearly three decades in the US, where he earned his PhD in computer science and worked at various American companies.
Having scaled the peak of foundry manufacturing, Taiwan's semiconductor industry once again faces a challenge as it becomes increasingly difficult to cram more transistors onto smaller and smaller chips.
"As Moore's Law is slowing down, it does impose tremendous pressure on the industry," said Hu. "For leaders like TSMC, it has to use other means to help." He cited technologies like 3D packaging, which involves stacking chiplets - integrated circuit blocks - vertically.
Challenges also come in the form of advances in brain-like neuromorphic chips and the roll-out of 5G networks enabling IoT connected devices.
"My understanding, for IoT, many chips do not need advanced process technologies," Hu said. "For sensors, mature processes and 8-inch fabs are adequate."
Another challenge is China's decision to become more self-sufficient in semiconductor production amid its trade war with the US - despite all the inherent difficulties this involves, such as decades of investment and cultivation of deep expertise over many generations.
Facing this trend where smartphone brands are innovating and starting to develop their own chips, MediaTek needs to stay ahead
- Joe Chen, president of MediaTek
Taiwan-based MediaTek said last month it is stepping up investment in research and development and brand awareness as it seeks to better compete in an environment where mainland Chinese firms are looking to produce more of their own chips.
"Facing this trend where smartphone brands are innovating and starting to develop their own chips, MediaTek needs to stay ahead and offer the best technology even if this phase reverses," said Joe Chen, president of MediaTek, in an interview with the Post last month in Shenzhen.
MediaTek, a close competitor to US semiconductor giant Qualcomm, makes chipsets for smartphones and home appliances such as televisions. Its smartphone chip business generates about a third of overall group revenue, with most of its sales coming from Android handset makers, especially those in China.
Oppo, China's second-largest smartphone vendor that uses chips from both Qualcomm and MediaTek, recently started to develop its own chips, according to several Chinese media reports, citing unidentified sources.
It should not be surprising then if other regions eventually gain on Taiwan in manufacturing, given how the US once dominated the market before Japan, South Korea and then Taiwan moved up, according to Chenming Calvin Hu, former chief technology officer at TSMC between 2001 and 2004.
"Next will be China and India," Hu, 72, was quoted as saying in a 2016 interview published in IEEE Design & Test magazine. "The semiconductor industry is large. No single region can expect to be the biggest in manufacturing, IC [integrated circuit] design, equipment, and innovation, at least not for long."
Still, most agree it is a race for Taiwan to lose.
Despite China's renewed push to gain parity in various aspects of semiconductor design and manufacturing, industry insiders say the country is two-to-three generations behind the US and Taiwan and will need at least five-to-10 years to catch up.
"The foundry model will still exist even with Moore's Law slowing down; there will always be technology innovation regardless of the business model, it is a complicated technology business," said Tsai, MediaTek's chairman. "The local industry will just keep adapting, innovating as before."
This article was first published in South China Morning Post.