The phone rings.

Holed up in a noisy and messy office, Jen-hsun Huang, founder and CEO of graphic solutions provider Nvidia, answers the call. With a stunned look on his face, he turns his head around to his team of engineers, hollering: "Shut up, be quiet! Morris Chang's on the phone, it's Morris Chang!"

This memorable phone call marks the beginning of a technological revolution.

Nvidia would grow into a global leader in the field of graphic processing units with annual revenue in excess of US$4 billion thanks to the trusting relationship it would develop with TSMC over the next decade or so. And Nvidia's growth would clearly show that TSMC is a company of epochal significance: By pioneering the business model of the dedicated IC foundry, TSMC has helped its customers break new ground.

TSMC took on a business that was "not essential" in the eyes of vertically integrated semiconductor giants such as Texas Instruments, IBM and Toshiba, and turned it into an engine of global technological innovation.

Behind each new generation of technological innovation ranging from PCs to telecommunications, smartphones and tablets, there are scores of IC design houses that team up with dedicated foundries. This division of labor allows engineers to focus on their creativity without having to raise capital for costly manufacturing plants. Instead, they place their orders with an IC foundry.

Thanks to TSMC, the IC design industry has moved from the margin to the mainstream.

According to the latest figures from US-based IC Insights, a leading semiconductor market research firm, IC design houses account for 29 percent of the global semiconductor market, posting nearly US$79 billion in total revenue last year.

Just Like Clockwork

TSMC became an industry standard-bearer due to the will and ambition of its leader.

What Morris Chang brought to the company is a certain way of thinking and a set of values. "What I brought is a world-class vision," remarks Chang.

The core values Chang established for TSMC are "ICIC." The four letters stand for integrity, commitment, innovation and customer trust and have become an integral part of TSMC's corporate culture.

"I believe the most precious thing for this company is: Whatever it does, no matter if big or small, short-, medium- or long-term, it will always have a vision leading the way. Once the vision has emerged, a very well thought out strategy will follow on its heels, and then, a very well thought-out execution plan will round it out," observes independent director Chen Kok-choo, a former TSMC senior vice president and general counsel. In Chen's eyes, from vision and strategy to execution, TSMC operates like a well-oiled clock.

In a nutshell, it takes an extraordinary organization to be able to provide outstanding products and services.

"Based on my professional training, a very high measure of my respect for TSMC stems from the fact that TSMC is a company from Taiwan. In Taiwan, many companies believe they won't be successful if they abide by the law. TSMC has proven them all wrong," she says.

At TSMC, these invisible values and a compliance-oriented corporate culture have quietly been the guiding principle for many crucial decisions, both minor and major.

Technological Autonomy Ambitions

A thirst for technology also laid the groundwork for the company's success. Back when Taiwan was a technology backwater and Hsinchu a small town with a shortage of high-tech talent, Chang set an audacious goal for TSMC.

Chunghwa Telecom Chairman Rick Tsai, the former chairman and CEO of two TSMC subsidiaries, joined the company upon returning from the United States, where he had worked as an R&D project manager at HP. He was flabbergasted when he heard how high Chang had set his sights: "We want to become at least like Intel."

"We want to become like Intel ! - never before had anyone dared to think like that. People thought it would be good enough if they managed to stay one generation (in process technology) behind. Of course it's difficult, but what's important is that you have this burning ambition," recalls Tsai with undisguised admiration for Chang.

While working at IBM in the United States 14 years ago, Dr. Kenneth Kin met with TSMC Vice Chairman F.C. Tseng to offer him a license for IBM's 0.13-micron process technology, but Tseng rejected the offer outright.

  "However, UMC immediately made the deal. It dissolved its own R&D team and sent more than 100 people to the United States," remarks Kin, now a professor at the Institute of Technology Management of National Tsing Hua University. Brushing off an offer from technology leader IBM was a tough decision at the time, Kin says, but in hindsight, it proved right.

Grand Alliance with Customers

TSMC not only developed technological independence but also designed a competitive strategy that starkly differs from Intel, which exclusively makes CPUs, and Samsung, which started out as a DRAM manufacturer.

Two years ago, Chang initiated the "Grand Alliance" strategy, in a bid to set itself apart from Intel and Samsung.

Within this grand alliance, TSMC sits in the middle, with plant and facility suppliers in the rear and customers in the front. Cooperating to co-create value is what the grand alliance with customers, equipment suppliers and intellectual property firms is about, a far cry from the traditional conglomerate that squeezes its suppliers to boost its profits.

Not only has the market value of TSMC reached a record high, the innovative prowess of alliance members Qualcomm, Broadcom and MediaTek has left Intel, the unrivaled technology leader during the PC era, in the dust.

The grand alliance has proven particularly effective with the spread of mobile devices and the Internet of Things. "Technology is becoming more complex. No individual company can singlehandedly handle this war," Chang says.

Last year, TSMC churned out over 8,400 different products to more than 400 customers using more than 200 different manufacturing processes. Such flexibility and diversity is beyond the reach of Intel and Samsung Semiconductor.

A World-Class Board of Directors

It is not out of the ordinary that companies grow into giants. However, it is the exception that a company does not stray from an ethical path and stays true to best corporate governance practices.

From day one of TSMC's founding, the board of directors was able to effectively monitor company executives and upper management, preventing cozy networks that are fraught with conflicts of interest.

"In Taiwan, the board of TSMC most meets international standards," remarks Albert Hsueh, chairman of the PricewaterhouseCoopers Education Foundation. TSMC's eight-member board includes five independent directors across a broad spectrum of expertise: former British Telecommunications CEO Peter Bonfield, Acer Inc. Chairman Stan Shih, former Texas Instruments Inc. Chairman Thomas J. Engibous, economics professor Gregory C. Chow and legal expert Chen Kok-choo. Hsueh believes that a board composed of such distinguished experts is able to make high-quality decisions.

With independent directors accounting for more than half of the total number of directors, TSMC is more likely to find possible blind spots in decision-making.

In the 20 years that CommonWealth Magazine has conducted its "Most Admired Company Survey," TSMC has never relied on miracle or eureka moments. Instead, it has grown gradually and steadily with dogged persistence into a company of world rank that can hold its own against multinationals Intel and Samsung.

Faced with never-ending challenges, Chang's fighting spirit has even become stronger with the years.

"It's a matter of passion. Passion is not about how much money you make. If it were, you would be satisfied once you made that amount of money and then you would lose your passion. Passion is the kind of passion that makes you 'lead a job to success' or 'to compete to win.' So you can only be satisfied if you keep fighting forever and keep winning," declares Chang categorically.

Actually, there are no secrets to TSMC's success. It all started with Chang's strong convictions on how to run the company.

The following are highlights from CommonWealth Magazine's exclusive interview with Chang:

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Q: What were the crucial moments in the 30-year-long history of the semiconductor industry? What changes has the industry seen over the past three decades?

A: One of the greatest changes was the change that TSMC brought about. The founding of TSMC marked the creation of two industries: One is the establishment of dedicated foundries, the other the formation of many fabless semiconductor companies. Moreover, numerous companies that were integrated device manufacturers (IDM) abandoned R&D and manufacturing, which released a lot of talent [into the market], triggering a lot of innovation.

TSMC served as a catalyst for all fabless semiconductor companies.

In the very beginning, innovation took place at fabless semiconductor companies such as Altera and Xilinx, which satisfied demand for the development of electronic components. Then came PC chips. Intel was only able to make central processors; they believed that CPUs were the most lucrative thing so they only made these. Many other chips, particularly graphic chips, were designed by fabless semiconductor companies. PC monitors became increasingly beautiful. That was because [of chips] designed by Nvidia and ATi.

Subsequently, greater innovations came, first mobile phones, then smartphones and tablets. These ICs, these innovations would have been completely impossible without the contributions of these fabless chipmakers and if we only relied on IDM companies such as Intel and Texas Instruments.

In the very beginning, I did not expect such a chain reaction, but once the chain reaction took place, the very existence of TSMC generated supporting forces.

Q: What was the key to success?

A: I think mainly it is insistence on a vision, persistence and philosophy.

You envision a goal and then keep working toward it. On top of that, you have sufficient skills and sufficient experience to do it.

Key to our success were the three competitive advantages that I designated for TSMC: leading technology, excellent processes and customer trust. Many companies have only one or two of those, and very few companies are able to build a partnership or trust with their customers.

What did I bring when I came to Taiwan in 1985? Actually, I didn't bring any technology at all. I hadn't worked in technology for quite some time at that point. What I did bring with me, however, was a new way of thinking, a new vision -- a world class vision, so to speak.

Q: How did you establish the three competitive advantages?

A: By hiring the right people, hiring capable people, and instilling the right philosophy in them and letting them do their jobs.

Q: Many other companies do just that but are not able to achieve what TSMC did. Is this due to a different corporate culture?

A: Culture is only the outcome, management is what really counts. This includes strategy and the power of execution – both are indispensable.

If there is no strategy, execution will go around in circles because without strategy, execution has no direction. If there is strategy but no execution, then strategy as such is useless too. You could say that strategy and execution are equally important.

Our major strategy is to do well in these three competitive advantages. Aside from these, we also have many minor strategies. For example, there should be individual strategies for different customers and different technologies.

Once you have these major and minor strategies in place, you need to hire capable people to execute them; you need to make them believe in the direction in which you want to move forward.

There are no secrets, what I am talking about are basic truths.

Q: Is the corporate leader still the most decisive success factor for an industry standard-bearer ?

A: Not just for industry standard-bearers, I am afraid that for any organization the leader is the most important factor.

Q: What changes and what remains unchanged at TSMC?

A: I think that principles and values should not change. Our corporate values – integrity, commitment, innovation and customer trust – these will not change.

The idea that I brought with me back then – "if you want to do semiconductor business, you have to do it on world-class level" – this idea has remained unchanged all along.

However, when it comes to which customers we want to find or which markets we should target, all this can change.

In order to become an industry standard-bearer it takes honest management and continued innovation.

Translated from the Chinese by Susanne Ganz