TSMC admitted at an investor conference on Jan. 15 that it has been overtaken in 16nm technology by Samsung. A big reason is Liang Mong-song, who sold out to the Korean company. Here's the story of what went down.

On Jan. 8, two foreign brokerages downgraded their recommendations for Taiwan Semiconductor Manufacturing Co. (TSMC). For one of them, Credit Suisse, it was the first time it had voiced pessimism over TSMC's prospects after having had looked favorably on the world's largest contract chip maker for more than five years. The main reason cited was more intense competition from Samsung Electronics and Globalfoundries this year.

Five years ago, TSMC Chairman Morris Chang called Samsung a blip on the radar, but the Korean giant has come on quickly and is now poised to deal TSMC a major blow.

Chang began developing energy-saving FinFET technology more than 10 years ago, and TSMC was expected to mass produce chips using the 16nm FinFET process in the second half of 2015. But Samsung beat TSMC to the punch by at least six months, launching mass production of wafers using similar technology in early December 2014.

The big question at TSMC's investor conference on Jan. 15 was whether the chip maker had lost the majority of Apple's orders for Apple's new-generation A9 processor to Samsung. Answering analysts' questions, Chang admitted that in the technology arena, "we have fallen a little behind."

But he defended the company's fundamentals over the past six months and stressed that TSMC would catch up next year and "gain a bigger market share in a bigger market."

TSMC is now lagging an Asian competitor in logic process technology for the first time in more than a decade and may lose A9 processor orders because of it.

A key force behind Samsung's edge is a middle-aged Taiwanese with bushy eyebrows who has been Samsung's System LSI division's chief technology officer for three and a half years and works at Samsung's R&D headquarters in Seoul. His name is Liang Mong-song, a former senior director of R&D at TSMC's Advanced Modules Technology Division.

To him, and the five former TSMC colleagues he took with him to Samsung, this constitutes a momentous victory.

"If TSMC didn't allow him (Liang) to leave at the time, it wouldn't be in such bad shape today," laments one semiconductor professor close to TSMC's executives.
This one individual, whose changing of jobs so profoundly affected the fates of two countries' major chip makers, has come to be known as Taiwan's No. 1 turncoat.

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