Before Nvidia Corporation NVDA became the world's most valuable semiconductor company, it was on the brink of bankruptcy—until a single letter from Jensen Huang to Tawan Semiconductor's TSM Morris Chang changed everything.
What Happened: In 1997, Nvidia was struggling financially, with just 50 to 60 employees and an increasingly uncertain future.
Facing potential bankruptcy, Nvidia CEO wrote a letter to Chang, pleading for the company's support in manufacturing a critical chip that could turn Nvidia's fortunes around.
In a podcast, Chang recalled time saying that in his letter, Huang explained that Nvidia had developed promising technology but was struggling to find a reliable foundry partner.
Nvidia had already approached TSMC's San Jose office but had received no response. The letter, mailed to TSMC's general post office, eventually made its way to Chang, sparking curiosity and irritation.
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"The letter raised my curiosity and also irritated me a little bit," Chang recalled. "I had always told our salespeople that we should never be negligent in talking to future customers, even if the customer seems to be a very small one."
Coincidentally, Chang was planning a visit to the U.S. the following week. He decided to call Huang personally using the phone number printed on the letter's stationery.
Huang answered amidst background noise, seemingly in the middle of a heated discussion with his team. But as soon as he realized who was calling, he silenced the room and excitedly shouted, "Quiet! Morris Chang is calling me!"
The two arranged to meet in person, where Huang made a bold prediction. Despite Nvidia's financial troubles, he was confident that its upcoming chip—whose name Chang couldn't recall—would not only save the company but also make Nvidia one of TSMC's major customers.
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"That was quite a bold statement," Chang admitted. "We were a billion-dollar company at that time, and to be a major customer of ours, he would have to produce revenue for us of at least $50 million a year."
Against all odds, Huang's prediction came true. The chip was a massive success, not only rescuing Nvidia from financial collapse but also cementing its position as a leading force in the gaming and graphics industry.
Within two to three years, Nvidia had become one of TSMC's top five customers.
Why It Matters: Today, Nvidia and TSMC's partnership, potentially valued in billions of dollars, is one of the most important in the semiconductor industry.
TSMC manufactures the world's most advanced chips, including Nvidia's AI-focused GPUs, which have driven the company's market valuation to $3.057 trillion.
Nvidia's AI processors, such as the H100 and upcoming Blackwell GPUs, rely on TSMC's cutting-edge fabrication technology. Nvidia contributed 11% of TSMC’s revenue in 2023, according to estimates from semiconductor analyst Dan Nystedt. The company paid TSMC $7.73 billion that year for its services.
Earlier it was revealed in Chang's biography that in 2013 he offered Huang the position of CEO at his company. However, the Nvidia CEO declined, stating, “I already have a job.”
TSMC currently has a market capitalization of $1.081 trillion, making it the 10th most valuable company in the world.
However, reports from last year suggested strain in Nvidia and TSMC's three-decade partnership. The Information reported that TSMC believes Nvidia rushed production despite knowing about Blackwell’s defects. Meanwhile, Nvidia blamed delays on TSMC's new semiconductor packaging technology.
Photo Courtesy: Glen photo on Shutterstock.com
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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