Return to Earth
How two refugees established the technology industry in Taiwan and India
In 1950 Massachusetts Institute of Technology (MIT) admitted two hardworking students who had lost their national identity. They would go on to shape the future of the technology industry and become heroes in their adopted homelands.
Without a home
Born in 1924 Fakir Chand Kohli grew up in the city of Peshwar in the western provinces of British India, now in Pakistan. He came from a well-to-do business family who owned a chain of department stores. The emotional trauma of losing his father during his senior year of college motivated him to become more independent and establish himself. In 1946, he won a government scholarship to study power engineering at Queen’s University, Canada.
Tragedy struck his family the year later when British India gained independence and was partitioned into Muslim-majority Pakistan and Hindu-majority India. This triggered the largest migration in human history where 7 million Muslims trekked to Pakistan and an equal number of Hindus and Sikhs fled to India. The massacre and brutality that ensued left a bloody mark on the subcontinent’s history. Trains filled with the corpses of refugees were sent from Pakistan to India and vice-versa in acts of vengeance. Millions were forced to forsake their property, possessions, and wealth and flee to either country based on their religious identity. Fearing for her safety, Kohli’s mother packed a small bag with two pairs of clothes and medicines and left for India in midst of the bloodshed. For someone who grew up in a peaceful community of Hindus, Sikhs, and Muslims, the news of the religious genocide shocked Kohli deeply.
After a brief stint at General Electric Canada, Kohli left to pursue a master's in control systems engineering at MIT, with the hope of providing technical leadership when he returned to India. Little did know that there was another student refugee on campus who was soul-searching.
War and Hope
It was the morning of December 8th, 1941 and 10-year-old Morris Chang (Zhāng Zhōngmóu) was walking to school. He could hear the sound of bombs but he continued on his way indifferently. After all, he had an exam that day and as a diligent student how could he miss that? Japan had attacked Pearl Harbor the day before and they were now raining terror on Hong Kong. The British forces could not resist the Japanese aggression and surrendered the city on the day of Christmas. This would be one of the many series of escapes the Chang family would endure.
Morris Chang grew up in an era of turmoil and war. The Japanese massacre of Nanjing left a deep scar on the collective consciousness of the people. 300,000 civilians were murdered indiscriminately in addition to brutal war crimes such as mass rape, looting, and arson. After Japan seized control of Hong Kong, his family made a 50-day arduous journey to Chongqing, which was the interim capital of the Republic of China. When World War II ended in 1945, the family took a US military plane to Shanghai to establish a new life. They had peace for three years until the Communist army reached their doorstep.
The lack of social stability greatly demoralized his parents. They wanted the best for their only child and had high ambitions for him. As a constitutionally weak child, Morris did not spend much time outside so his mother would bring him books from the library which he would devour. He became a voracious reader as a result. Morris’s father grew up inspired by the ideals of the philosopher Hu Shih, who championed the cause of liberalism and democracy. He had great ambitions for himself but they were foiled by constant war and social instability. A disappointed man, he channeled his aspirations into his son. With his savings from his career as a bank clerk, he decided to send Morris to the United States to get a world-class education. The family had funds only for a single year of college and they left it to Morris to figure out the rest.
In 1949, Morris Chang left mainland China for Boston where he had a relative who was a professor at Northeastern University. With his help, Morris got admission to Harvard University. A rare and remarkable feat for a Chinese immigrant at that time. After a year of studying the classics and basic sciences, which he thoroughly enjoyed, he decided to major in mechanical engineering and transferred to MIT.
He attempted to get a Ph.D. at MIT but was rejected twice. This demolished his self-esteem and threw him into an existential crisis. “The shock at that time made me unable to eat and sleep normally for several days”. Frustrated by his failure to make it as an academic, he tried his luck to enter the industry. Like any poor student, he picked the job that paid the most and joined Sylvania (as it paid a dollar more than Ford). Sylvania was known for making light bulbs, televisions, and vacuum tubes. They were trying to enter the semiconductor space and needed mechanical engineers who could build their production lines for transistors. Morris was concerned about one aspect of the job though, he had never heard the word “transistor” before.
“I don’t know anything about computers”
The introduction of computers in India was rife with mistrust and suspicion. The Indian governments during the mid to late 20th century followed a socialist policy and considered computers as job-displacing machines. Computers were marketed as “advanced ledger posting machines” so as to not spook labor unions at banks. As a result import duties on computers were high so as to discourage large-scale attempts at automation. Computers were purchased for university research departments and government agencies. This typically needed funding and approval from the government. Very few private enterprises could afford to buy and maintain a computer.
In 1951 IBM set up operations in India at the invitation of Nehru, who was India’s first Prime Minister and a champion of modernization. IBM followed an “As Is” policy. Older generation mainframe computers that were discarded by western clients were refurbished and leased out to customers in India. While they provided excellent service, many policymakers believed that IBM charged extortionary prices. They were also displeased by the fact that the technology in India was a generation or two older compared to the West. During the 1970s the government took a protectionist stance and wanted to cap the foreign equity of companies operating in India to 40%. This created a rift between IBM and the government which led to IBM ending its operations in India in 1977. The industry minister at the time who was leading the negotiations was caustic in his condemnation.
IBM was very cocky. They went to the extent of telling me that they have refused to accept what the French President, General Charles de Gaulle, had told them (to dilute their equity). So I told them, ‘if you think the General succumbed to you, I am telling you that I am not succumbing to you. You get out.’ Yes, I said ‘You get out’.
It was in this stifling business environment that Kohli was bootstrapping a software company. After graduating from MIT in 1951 he returned to India. He declined an offer to pursue a Ph.D. in order to assist his family who was displaced by the partition. Kohli joined the Tata Electric Company which was part of the larger Tata Group conglomerate. As an intellectually curious engineer, he leveraged the computer at the Tata Institute of Fundamental Research in Bombay to automate certain power plant operations.
This caught the eye of the group chairman J.R.D. Tata. He directed Kohli to start a company that could computerize various operations within the Tata group and offers its technical expertise to other companies. Trying to evade the appointment, Kohli is believed to have told J.R.D. Tata, ‘I don’t know anything about computers.’ To which J.R.D shot back, ‘Well, no one in India knows anything either.’
F.C. Kohli in his heyday. J.R.D. Tata is the one kneeling in the second photo. Source ,Source
At his behest, Kohli started Tata Consultancy Services (TCS) in 1969. Most of the projects were around servicing punch card delivery systems and building solutions to reconcile deposits and withdrawals between bank branches. As these project opportunities dried up, Kohli was forced to think out of the box to source lucrative projects that could justify the company’s operations. Being a board member of the Institute of Electrical and Electronics Engineers (IEEE), he had access to a network of technology professionals to whom he could pitch the company’s services. That’s how he found his patrons at Burroughs.
In the 1970s Burroughs Corporation was a distant second to IBM in manufacturing computers. The executives were looking for a contractor who could develop an operating system for its new line of machines and they were intrigued by Kohli’s proposal. Companies like IBM, DEC, and ICL usually bundled software along with the hardware. This was a novel attempt to decouple software development from computer production. Moreover, the software was to be developed halfway around the world. They offered TCS a $24,000 contract in 1972. A jubilant Kohli returned to India. But there was a challenge. TCS did not have a Burroughs computer to develop their software on. Moreover, with the bureaucratic red tape, it would take 2 years to import one. As fate would have it, the labor unions at the Life Insurance Corporation, a government monopoly, threatened to strike if the International Computers Limited (ICL) 1903 computer was installed. TCS bought it for pennies on the dollar.
The enterprising engineers at TCS developed the operating system on ICL and wrote a translator which could convert it into Burrough’s compatible code. Since there was no internet, the code was literally shipped from Bombay to Detroit. The executives were impressed. Not only the operating system worked seamlessly, but also they had a tool that could enable potential clients to migrate their software to Burroughs. Burroughs won many customers in the UK who wanted to upgrade their systems from ICL. This was India’s first software export. It was soon followed by contracts from the Detroit Police Department, the State University of New York, and banks. This success heralded the birth of the Indian Information Technology (IT) industry.
Ignorant Apprentice
The invention of the transistor is one of the greatest achievements of mankind alongside the electric light, the telephone, and the steam engine. As a small lightweight semiconductor that required little energy, it quickly replaced vacuum tubes and became a critical component in computers, missiles, televisions, phones, and satellites. In 1952, Bell Labs began to license the patent for the transistor which allowed many companies such as IBM, Motorola, General Electric, and Texas Instruments to enter the semiconductor industry.
Conscious of the fact that he was an “ignorant apprentice” he learned the fundamentals of the technology and optimized the production of germanium transistors. He observed that the yield of the production line was very poor which had to do with the high temperature of the soldering device ruining the internal chemical structure of the transistor.
I found the "Conduction of Heat" textbook I had read at MIT, made a rough estimate and found that my suspicions were correct. So in the next few days, we tried an indirect heating method: they used the high thermal conductivity of a copper wire as an intermediary to decompose part of the electrode to complete the welding. ….One or two days later, the welding speed of their new method has reached eight or nine times of the original method.
He poured his time and energy into understanding semiconductors. His bible was “Electrons and Holes in semiconductors” which was authored by William Shockley, who shared the Nobel Prize with his colleagues at Bell Labs for inventing the transistor.
After a three-year stint at Sylvania, he hit a glass ceiling and decided to take up a job offer at Texas Instruments (TI) which pioneered the production of silicon-based transistors. While silicon was a superior element it required high temperatures to process and there was no method to produce it with the high purity requirements of a transistor. Gordon Teal, a researcher at Bell Labs, joined TI to establish a research lab that invented the silicon transistor in 1954. When this was announced on May 10 at the Insitute of Radio Engineers it created a sensation!
Many in the audience were still dozing off. Finally, after reading the thesis, Teal raised his head and said slowly in his Texas accent: "We have successfully fabricated a silicon transistor… Texas Instruments is in trial production, and it is expected that in a few months, it can be mass-produced.” The audience was suddenly awake, and the atmosphere in the venue was suddenly tense. Before Teal could finish speaking, dozens of hands were raised. The questioner didn't believe his ears: "Do you really make real silicon transistors?
Teal took out two radios, one fitted with a germanium-based transistor and the other with silicon. He immersed both the radios into a bucket of hot water. The germanium-based radio broke down while the silicon-based one continued to play. The event had close parallels to the unveiling of the iPhone in terms of media coverage and societal impact.
Morris Chang during his tenure at TI. Source
While TI certainly invented the technology they were struggling to mass-produce the transistors to meet their clients' quality standards and delivery timelines. Morris Chang applied his knowledge of physics and process optimization to increase yields by 25-30%.
Suddenly we were in business. Whereas before, we were just cranking out rejects. And it was a very important product line for Texas Instruments at that time. And I remember that night, I mean I couldn’t sleep I was so excited, I knew that I had accomplished something big because I knew the impact of the high yield. And the profit that resulted from that was significant to Texas Instruments.
Impressed by his engineering chops, management decided to invest in Morris as a future leader in TI and sponsored his Ph.D. at Stanford in 1961 which he completed in 3 years. He got his Ph.D. after all.
One of the reasons for TI’s success as the biggest and most profitable integrated circuits business in the world could be attributed to Chang’s controversial pricing strategy. Semiconductor manufacturing is a capital-intensive industry and manufacturers would charge a lot to cover their upfront costs. Moreover, at that time new production lines had terrible yields as low as 5% i.e. for every 100 chips produced only 5 would work. This was due to reasons such as dust contamination, defective equipment, and chemical impurities. Chang knew from a painful experience that it takes a lot of engineering effort to bring the production yield up. He realized that he could improve the yields by operating the production lines at max capacity so that the staff could learn from their mistakes and iterate faster. The challenge was that if TI continued to charge exorbitant prices it would discourage customer demand which would slow down the improvements in production lines. Chang hired Boston Consulting Group, a small unknown consulting outfit back then, to crunch numbers for his “learning curve pricing” strategy. TI would price their chips below the market price thereby driving demand and pushing their production lines to operate at maximum capacity. This sped up the learning process on the production line which improved the yield dramatically. The pricing model also created a moat that prevented new entrants as they could not compete with TI’s prices.
In the semiconductor business, we always asked for profit margins in excess of 50%. My strategy at the time was to sow despair in the minds of my opponents. When even Texas Instruments could only achieve a profit margin of 40% by asking the lowest price, they knew they had to get out of the business.
During his 25-year career at TI Morris rose through the ranks to become the Vice President of TI’s semiconductor business in 1972. In 1978 Chang was transferred to the flailing consumer products division. Frustrated that he was “put out to pasture” he resigned from TI and joined General Instruments as their COO in hopes to become their CEO in a few years. It turned out that they were more focused on acquiring companies in the hopes of turning them around to sell at a profit. This did not thrill Chang as he wanted to be close to research and product development. He resigned in a year with no foreseeable prospects. Being 54 years old, he was seriously considering retirement. That is until Yu Kuo-Hwa, the premier of the Republic of China aka Taiwain, made an intriguing offer.
No power on Earth can stop an idea whose time has come
Back in India, Kohli was growing TCS from strength to strength. Kohli was a taskmaster. His successor at TCS described Kohli as a “benevolent dictator”. For instance, he instituted a policy that the engineers could not take more than ten compilation (converting code written by developers into assembly language understood by computers) attempts to get a program running. To ensure that target metric, he kept a limit of 3 attempts to write code that is free of syntax errors. It was a forcing function for the developers to manually review their code before testing it out on a computer. Back then mainframes were a shared resource between all the engineers. So the goal was to reduce the number of trials so that the computer had more capacity to handle code submissions as the workforce increased. Anyone who violated the rule would have to get explicit approval from Kohli which was a daunting task. Such an iron fist policy ensured that projects got delivered on time and costs were kept under control.
Kohli was a man on a mission. He wanted to create recognition not just for TCS but also for India.
We are all working for the country. The profits are there, but the first step is to work and serve the people. If we do that, profits will come. Service of people means focus on client, build up your knowledge, and help the client to build for [their] clients. In the process, don’t forget that I am learning as much as my client. Learning should never stop.
He emphasized to his staff to keep updating their skills as they operated in a fast-changing industry. Kohli worked closely with educational institutions to create computer science programs that could churn out software professionals to meet the rising demand. By the late 1980s, TCS was the largest software consultancy in India with international clients in 40 countries.
The success of the outsourcing model led to other big Indian players emerging in the scene namely Infosys, Wipro, and HCL. 1991 was a watershed moment for the industry as the Indian government ushered in sweeping reforms which liberalized the economy. Gone were the days of elaborate licenses, regulations, and the accompanying red tape. This made it easier to export software and services with little government interference.
The industry received another boost in the late 90s when there was a huge demand for software professionals to fix the Y2K bug. Essentially many programs at the time used two digits to store a year. So when the world entered the new millennium the year 2000 and 1900 would be indistinguishable. Media reporting at the time considered the Y2K bug a doomsday scenario. Banks were at risk of computing incorrect interest. Airlines were at risk of having their scheduling systems break down. The Indian IT industry rose up to the challenge and became a major workforce in fixing this bug in various client companies around the world.
TCS and Infosys are currently valued at $150B and $80B respectively. The IT industry accounts for 8% of India’s GDP and is a poster child of India’s development success story.
Kohli retired from TCS leadership in 1999. A strong advocate of leveraging technology to accelerate literacy, he devoted his time to shaping technology and education policy for the government. “The father of the Indian IT industry” is a fitting epithet for his decades of hard work in establishing the industry.
Harvard Business School professor Clayton Christensen, famous for developing the theory of “disruptive innovation” and author of the acclaimed book “Innovator’s dilemma”, remarked that the only time there had been disruptive innovation in the Indian software industry was when TCS pioneered the onsite-offshore model, where software development was physically separated from the client.
A similar epiphany came to Morris Chang in 1985.
An Economic Miracle
In 1978 Carver Mead, a renowned researcher at Caltech published a seminal book on Very Large Scale Integration (VLSI) which covered the process of creating an integrated circuit (IC) by combining millions or billions of MOS transistors onto a single chip. Chang was familiar with the work during his career at TI. What caught his attention was Mead’s proposition that IC design could in theory be separated from manufacturing. This could create a business opportunity where a company does not design ICs but instead operates semiconductor fabrication plants that produce ICs for other companies. In other words a pure-play foundry. However, there was no market for such a company then since IC design and manufacturing were done in-house.
This idea remerged during Chang’s tenure as the President of the Industrial Research Insitute (ITRI) in Taiwan.
The Premier who appoints the President of ITRI told me that he particularly wanted to use my ability to transfer technology from just research results to economic benefits for Taiwan industry.
K.T. Li was at that time a “minister without portfolio” tasked with the goal of creating a technology industry in Taiwan. Within a few weeks of landing, K.T. Li called upon Chang to prepare a business plan to establish a semiconductor industry in Taiwan. It was very competitive to break into the industry with giants such as TI, Intel, and IBM. Moreover, Taiwan had no competency in research & development, nor did it have any strengths in IC design. There was neither any intellectual property nor any background in sales and marketing. But Taiwan had some experience in manufacturing. Chang was convinced that instead of competing with the IBMs, Intels, TIs, and Motorolas of the world, why not manufacture chips for them at competitive prices using economies of scale to their advantage?
The government decided to take a bet on Chang’s idea. Chang spent numerous weeks pitching to investors from Intel, Toshiba, Sony, Hitachi, and TI to local Taiwanese businesses that had no knowledge about the semiconductor industry. There were times when K.T. Li or the Premier had to arm-twist these businesses to invest. In 1987 Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) was established as a joint venture between the Taiwan government (21%), Dutch multinational electronics giant Philips (28%), and other private investors. Morris Chang made the first TSMC sales calls with a single brochure: TSMC Core Values: Integrity, commitment, innovation, and customer trust.
The initial response was lukewarm at best, which ranged from “What the hell is Taiwan doing? What the hell is Morris Chang doing?" to “Who are you going to sell these wafers to? Who are you going to manufacture the wafers for?” Being at the helm of the semiconductor industry Chang saw that there were many designers who wanted to quit their jobs and start their own companies but the capital-intensive nature of the business prevented them from doing that. TSMC wanted to solve that problem by promising to be a reliable partner to these budding fabless companies.
The bet paid off in the 90s with the mushrooming of fabless semiconductor companies like Nvidia, AMD, Apple, ARM, and Broadcom which specialized in design and marketing while outsourcing their manufacturing to TSMC. TSMC is now the most profitable chip maker with a market cap of $400 billion and with 60% share of the global pure foundry market. Smartphones, cloud servers, laptops, and IoT devices all rely on chips manufactured by TSMC. At the time of writing this, TSMC is the only foundry capable of manufacturing 3-nanometer chips, which are 30,000 times thinner than human hair. It has become so crucial to the global supply chain that it is the center of the geopolitical tensions between the USA and mainland China. Chang retired from his second stint as the CEO of TSMC in 2018 at the age of 87. K.T. Li earned the moniker of “Father of Taiwan's Economic Miracle” for his role in transforming Taiwan from an agrarian economy to a technology-driven one. While Chang earned the sobriquet of “Godfather of the chip industry”.
No room for small dreams
Both Kohli and Chang shared many similar traits: a passion for learning, a focus on building trust with clients, and a relentless pursuit of excellence in delivery. TSMC and TCS benefited from globalization where it became economical to outsource parts of product development to countries that specialized in them. They also rose to prominence when governments liberalized their economies to encourage entrepreneurs to compete globally. Moreover, both Kohli and Chang acknowledged that fate was kind to them.
When Chang’s industrious father immigrated to the United States a few years after him at the age of 44, he enrolled in Columbia University’s business school to begin a new career. He was the oldest in his class and despite his qualifications and work ethic, he failed to get a job. As such he opened a small store to support his family. The dejection of being exiled from his home and the pain of his unfulfilled ambitions haunted him during the remaining years of his life.
As a senior director of IEEE, Kohli got the opportunity to visit his ancestral home in Pakistan in the 1970s. It was a melancholic moment to see the house where he grew up to become a shopping complex. Kohli always felt indebted to India for providing his family refuge and a future.
F.C. Kohli (source) and Morris Chang (source)
Poet and Philosopher
In 1924, the Indian poet Rabindranath Tagore was touring China. He gained fame for being the first Asian to win the Nobel Prize in literature. Many in the Chinese intelligentsia were familiar with his work. In fact, Tagore’s works were translated into Chinese in 1915 by Chen Duxiu, who was one of the founders of the Communist Party of China.
Tagore’s host during his stay was Dr. Hu Shih, the same philosopher who inspired Morris Chang’s family. Dr. Shih was a key leader in China’s New Culture Movement, which was based on progressive ideals such as democracy and science. Hu Shish was a Cornell and Columbia-educated philosopher who studied under the famous pragmatist John Dewey. While Tagore a mystic poet never really enjoyed formal education. Both these luminaries were grappling with the same existential questions for their respective countries. How does one bridge tradition and modernity? How can a society be modern but yet not Western? China and India were both ancient civilizations that were trying to reconcile Western ideals with their own philosophical thought. How could their societies progress materially while preserving their cultural identity?
During one of his lectures which was moderated by Dr. Shih, Tagore faced unruly protests from youth members of the then 3-year-old Communist Party of China. They considered Tagore a conservative who was against science. Communists strongly felt that his writings were full of escapism, which they considered to be dangerous. It had the potential of misleading people into stoically accepting the injustices in society.
Tagore was visibly upset given that he had championed scientific thought and temperament; having raised funds for building laboratories and sponsoring scientific research in India. Not to mention his poems and short stories inspired many in their struggle against British colonial rule.
Seeing the visibly upset Tagore, Dr. Shih tried to console him. He presented Tagore with his Chinese poem “Parinamana” (meaning Return to Earth), which advocated the thought that even those who had reached enlightenment like the Buddha should go back into society and persist for the upliftment of mankind. It is the sacrifices of such selfless individuals that drive societal progress.
Tagore and Hu Shih championed this ideal and heroes like Morris Chang and F.C. Kolhi exemplified it.
References
The Autobiography of Morris C. M. Chang—Volume 1, 1998
Silicon transistors offer superior operating characteristics
Itihaasa Research and Digital is a not-for-profit company that studies the evolution of technology and business domains in India
Wherever We Find Friends there Begins a New Life: Tagore and China
Morris Chang, in conversation with Jen-Hsun Huang, Computer History Museum
FC Kohli (1924-2020): A lifetime of service to the nation, Financial Express 2020
The visionary who made Indian IT industry global, Rediff 2020
FC Kohli, the Father of India's IT Revolution Was a Tough Taskmaster and a Visionary, The Wire 2020
How F C Kohli and TCS conquered the world, Rediff 2020
The Life and Times of F.C. Kohli, Father of Indian IT Industry, Dr. Shashank Shah, NITI Ayog
Two Countries, Two Lives, Seniors Today, 2020
Against All Odds: The IT Story of India, Kris Gopalkrishna, 2022
The Outsourcer: The Story of India's IT Revolution (History of Computing), Dinesh Sharma and William Aspray, 2015
Loved reading it. Very different from what I am immersed in. Interesting that Kohli did not know about computers .... embodies the principle that learning should never stop.
Very inspiring article!
Yes indeed, both Kohli and Chang had passion for learning, a focus on building trust with clients, and a relentless pursuit of excellence in delivery.