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UNIDENTIFIED REPORTER #1: This is the Nintendo Switch.
UNIDENTIFIED PERSON #1: We got to go.
UNIDENTIFIED PERSON #2: He's still shooting me.
UNIDENTIFIED PERSON #1: We got to go.
(CROSSTALK)
UNIDENTIFIED PERSON #2: No.
UNIDENTIFIED PERSON #1: No.
UNIDENTIFIED PERSON #3: So I got the Nintendo Switch. I got the big one.
NICK FIONDELLA: Animal Crossing came when, like, the lockdown started. This was a game that, like, if you were not a gamer, this was a game that you can still get into.
UNIDENTIFIED REPORTER #1: And during the coronavirus pandemic of 2020, finding one was harder than finding toilet paper.
UNIDENTIFIED REPORTER #2: Nintendo was hit hard by the global chip shortage during the last quarter. The gaming giant announced Wednesday it sold 23% fewer Switch consoles in the April to June quarter than a year before.
UNIDENTIFIED REPORTER #3: More and more companies are weighing in on the impact to their bottom lines. Nintendo, for instance...
UNIDENTIFIED REPORTER #4: Chip shortage, production delays and higher prices have really made it tough for people to find a vehicle...
UNIDENTIFIED REPORTER #5: Chips are needed for just about all devices - laptops, home appliances like refrigerators, gaming consoles and medical equipment.
PRESIDENT JOE BIDEN: But folks at home might be wondering, why such a big deal for manufacturing something so small, the size of a postage stamp? Why is that so important?
UNIDENTIFIED REPORTER #6: Overall, the shortage could cost the global auto industry $110 billion in lost revenues this year.
BIDEN: Well, semiconductors are small computer chips that power virtually everything in our lives.
UNIDENTIFIED PERSON #4: Every single electronic product these days has these chips in them that allow them to do what they do.
MIIN WU: Everything you're using today is part of semiconductor world.
UNIDENTIFIED REPORTER #7: Taiwan semiconductor manufacturing TSMC accounts for more than half of all global production of complex chips.
UNIDENTIFIED REPORTER #8: The world's massive reliance on TSMC may also leave the global chip supply vulnerable to earthquakes, drought and geopolitical tensions with China.
BIDEN: We don't have the ability to make the most advanced chips right now, but today, 75% of the production takes place in East Asia. Ninety percent of the most advanced chips are made in Taiwan.
UNIDENTIFIED REPORTER #9: Well, after four straight days of military exercises, including missile launches, precariously positioned warships and airspace-infringing fighter jets, China appears poised to keep its foot on the gas as it attempts to keep Taiwan in line.
UNIDENTIFIED REPORTER #10: Taiwanese tech giant TSMC warns an invasion of the island would render its factory inoperable, devastating global supply.
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RAMTIN ARABLOUEI, HOST:
I'm Ramtin Arablouei.
KENNY MALONE, BYLINE: And I'm Kenny Malone.
ARABLOUEI: And you're listening to a very special collaboration between THROUGHLINE and Planet Money.
MALONE: Now, the Nintendo Switch and the semiconductor, the two of those together tell a hugely important global story about this moment right now. But a little bit of background here. So the Nintendo Switch is a hugely popular video game system. It has sold 111 million units worldwide.
ARABLOUEI: Which is a fact that is probably worthy of its own episode. But we're not going to do that. We're going to focus on the tech that actually powers the Switch - semiconductors. And the question to begin with really is, what is a semiconductor?
MALONE: Yeah. Semiconductor is a specialized material that can do a huge number of jobs depending on how you manipulate that semiconductor. And without getting too technical - no semiconductors, no advanced computing. Like, that's the bottom line. And so semiconductors are in everything - cars, laptops, phones, ATMs, satellites, even nuclear weapons.
ARABLOUEI: Almost all of the world's most advanced semiconductors are created on one island - Taiwan, which sits about a hundred miles southeast of China. And its semiconductor industry makes it one of the most important places on Earth. If you think about semiconductors like oil - right? - then Taiwan is kind of like the technological Saudi Arabia. Some observers have even called Taiwan's semiconductor industry its silicon shield.
MALONE: And Taiwan has needed that shield. Since 1949, China has been run by one government and Taiwan by another, and China has never recognized Taiwan as an independent country.
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UNIDENTIFIED REPORTER #11: China has again said it will, quote, "reunite Taiwan with the mainland" as tensions ramp up further between Beijing and the self-governing island.
UNIDENTIFIED REPORTER #12: Taiwan disagrees with a pledge to defend its sovereignty and democracy.
ARABLOUEI: The U.S. does not have formal diplomatic ties with Taiwan but has pretty much supported the island as a buffer against China.
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UNIDENTIFIED REPORTER #13: A resounding show of American support for Taiwan. U.S. House Speaker Nancy Pelosi landing in Taiwan Tuesday, a display of defiance, ignoring days of perilous warnings from China.
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UNIDENTIFIED REPORTER #14: Are you willing to get involved militarily to defend Taiwan if it comes to that?
BIDEN: Yes.
UNIDENTIFIED REPORTER #14: You are?
BIDEN: That's the commitment we made.
ARABLOUEI: So these three places have formed a kind of weird love triangle. And Taiwan's rise as a major tech power has added more tension to that relationship.
MALONE: The story of how one tiny island got caught in between two world superpowers is fundamentally an economic story. It is a story of how Taiwan attracted its best and brightest back to the island and created Asia's version of Silicon Valley, a reverse brain drain built on semiconductors.
ARABLOUEI: In this episode of THROUGHLINE from NPR in collaboration with Planet Money, also from NPR, we're going to trace the story of Taiwan's rise through its biggest economic success and through the eyes of an entrepreneur who put a lot of semiconductors into the Nintendo Switch while keeping our own eyes on the rising tensions between the U.S. and China and what it could mean for all of us.
MALONE: Coming up, the Taiwan miracle.
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MARY: Hi from Knoxville, Tenn. This is Mary (ph). And you are listening to THROUGHLINE from NPR.
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UNIDENTIFIED PERSON #1: Part one - the Beautiful Island.
MALONE: In 1973, a 20-something Taiwanese student stepped off of a plane in Montreal, Canada.
WU: My name is Miin Wu. I actually grew up in Taiwan.
MALONE: It was Miin Wu's first time traveling to North America, and it was a journey that took multiple days - starting from Taipei, and then making stops in Tokyo, Seattle, Vancouver, until finally landing in Montreal. And when you're settling in a whole new place almost halfway around the world, it is, of course, not easy.
WU: Well, of course, you know, nevers. You know, first time go to a place where I have no idea. And also, I'm not speaking the language. And, you know, I mean, Montreal, you know, not only English, but also they speak French. So French is totally new to me.
MALONE: Miin arrived to pursue a masters at McGill University. He was going to study electrical engineering.
WU: When I arrived at McGill, the first day of the school, because I got teaching assistant, so I have to report to the professor. So I went to see him, and he say something to me.
UNIDENTIFIED PERSON #2: (Inaudible).
WU: I was stuck. I didn't know what he was saying. He repeat one more time.
UNIDENTIFIED PERSON #2: (Inaudible).
WU: And I still don't get it, OK? So he complained to the professor who assigned me to him - his class - and then he said, how come you send me someone don't know English to me?
MALONE: Miin later found out what this professor was saying.
UNIDENTIFIED PERSON #2: Good morning.
WU: He say good morning in heavy British accent. So I was totally out, OK?
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MALONE: It was a rough start, but Miin was going to stick it out.
WU: At that time, I'm having two choices.
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WU: I was study grad school in Taiwan, and I planned to work in Taiwan. But that time, my girlfriend went to U.S. So I have to decide it - whether I'm going to stay in Taiwan and maybe say goodbye to my girlfriend. So I decided to follow her footsteps.
MALONE: So he travels across the world from his beautiful, warm island to Montreal, where the winters are stupid cold. But look, he's got love to keep him warm, right?
Did you do things actively to try and learn English quickly? Did you listen to NPR constantly?
WU: (Laughter) No. At that time, I had no idea about NPR.
MALONE: But Miin was listening to the radio, it turns out.
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UNIDENTIFIED ANNOUNCER #1: This game is over. It was never in doubt. The Expos have beaten the Pirates 6-5.
WU: I turn on the radio to hear the baseball game.
MALONE: Yeah.
WU: And then I hear the hockey game.
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UNIDENTIFIED ANNOUNCER #2: He loses control, and the puck comes out of the Montreal end.
WU: You know, Montreal Canadiens was a very good team at that time - in the '70s.
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UNIDENTIFIED ANNOUNCER #2: And the game is over. The Montreal Canadiens have won the Stanley Cup for a record 16th time.
(CHEERING)
WU: That's how I pick up the speed.
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MALONE: Miin was going through all of this because he had a vision - another love.
WU: When I was undergraduate, I already fall in love with semiconductor.
ARABLOUEI: Semiconductors - even in 1973, in the infancy of the computer age, Miin Wu recognized that those little components that help computers run were the future. He could see it, and he could see his own future there, too.
WU: I think that will have a huge potential. That's the impression I got, myself, at the time.
ARABLOUEI: And back in Taiwan, the government was also recognizing the technology's potential.
TOM GOLD: So that's where K.T. Li came in.
ARABLOUEI: Li Kwoh-ting, otherwise known as K.T. Li, is sometimes called the father of Taiwan's economic miracle - the man who saw the future.
GOLD: He's a hero in modern Taiwan.
My name is Tom Gold. I'm a professor of sociology at the University of California, Berkeley. And my field of expertise is actually political economic development in East Asia - primarily China, Taiwan.
ARABLOUEI: Tom has been visiting and studying in Taiwan since 1969. He's also written a book called "State and Society in the Taiwan Miracle." And he actually met K.T. Li. We wanted to talk to him because he's watched this whole story unfold. But we'll get to that.
First, though, we need to go back before the miracle.
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UNIDENTIFIED SINGER: (Singing in non-English language).
GOLD: Taiwan refers to one large island and several offshore islands about 100 miles off the east coast of mainland China.
ARABLOUEI: Today, Taiwan is a self-governed democracy of about 24 million people that's claimed by China, but that's a very simple way of summing up a very complicated history.
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UNIDENTIFIED NARRATOR: Taiwan - about the size of Vermont and Connecticut combined. It has a range of high mountains running the length of the island. The climate varies from tropical in the south to semitropical in the north. Portuguese sailors named it Ilha Formosa - beautiful island. But the island people prefer the name Taiwan, which means terraced bay.
ARABLOUEI: Taiwan has long been a chess piece in East Asian geopolitics. Portuguese explorers named it Formosa. In the 17th century, both the Dutch and the Spanish occupied parts of the island. And throughout the 1900s, it was a pawn in a larger game over power and position between China and Japan. For 50 years, Japan occupied Taiwan and also engaged in battles with the mainland. In the 1930s, a military conflict arose between China and Japan, which resulted in an all-out war in China that lasted for almost a decade. The shared goal of driving out the Japanese led to a reluctant and uneasy alliance between the nationalists, led by a man named Chiang Kai-shek, and Communists led by Mao Zedong.
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ARABLOUEI: They defeated the Japanese in 1945 and then turned their guns right back on each other. A few years later, the Communists emerged victorious, and the nationalists were literally pushed off the Chinese mainland.
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ARABLOUEI: The nationalists settled on an island about 100 miles east of the Chinese mainland - Taiwan. Chiang Kai-shek vowed to stage a rebellion from there and take China back from the communists.
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WALTER CRONKITE: In December 1949, Chiang Kai-shek and the nationalist government flee to the independent island of Formosa - 100 miles...
ARABLOUEI: There's a documentary hosted by Walter Cronkite that shows Chiang Kai-shek gazing out over the island.
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CRONKITE: Here, Chiang waits, vowing to return. The future remains uncertain. The past...
GOLD: They didn't really expect to stay there, and they weren't going to put much investment into developing the economy 'cause their focus was on the mainland, where they planned to defeat the communists. And you had an influx of about 2 million more civilians and soldiers from the mainland who settled in Taiwan, expecting not to stay there, but to go back.
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GOLD: But, obviously, they haven't gone back to this day, and that has led to all sorts of political, social, economic consequences.
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MALONE: After finishing school in Montreal, Miin Wu decided to head south to the U.S., towards a place that would become the beating pulse of the tech industry.
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MICHAEL MURPHY: Mile upon lush green mile of fruit trees, heavy with apricots, cherries, almonds. Marketers had dubbed it, The Valley of Heart's Delight.
MALONE: But for decades, it had just been home to a paradise of produce, which, of course, would become Silicon Valley. Miin studied at Stanford there, then went to work at Intel.
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UNIDENTIFIED PERSON #3: You're creating things which change the way people work, the way they learn, the way they play, the way they communicate, the way they live their life.
MALONE: By this point, Miin says that his English had improved a lot, but he found that it still wasn't good enough.
WU: I did very good job on technical side, but I lost battle as a program manager position because they tell me there's another guy, and his English better than me. I lost the battle.
MALONE: So English was often part of the battle during your time in the U.S.
WU: Yes, exactly. And that's also the reason for me to go back to Taiwan.
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MALONE: Now, Miin was contemplating returning back home after all these years, except Taiwan would look a lot different compared to the island of his childhood. And a lot of that change happened in part because of the U.S.
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UNIDENTIFIED PERSON #4: Washington - with the Far East the center of world anxiety, President Eisenhower signs a congressional resolution giving him authority to use armed forces in defense of Formosa and another strategic islands.
MALONE: The reasons went back to the Cold War. Lots of you may already know this part of the story - that the United States was fighting communism wherever it spread, and it was paying particular attention to both Communist China and the nationalist exiles in Taiwan.
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UNIDENTIFIED PERSON #5: Since the Korean War, the United States has extended both economic and military aid to the free Chinese to keep the island from falling into communists' hands.
GOLD: What they were worried about was an invasion from the mainland that would incorporate Taiwan, and then it would become part of the People's Republic of China. The U.S. said, wow, Taiwan is now on the front line of communism. We have to roll back communism, starting with a place like Taiwan. We're going to commit a lot of military and economic and technical aid to Taiwan to prevent it from being taken over by the Communists.
ARABLOUEI: The aid that the U.S. gave to Taiwan was a way to contain China, and the U.S. went all out.
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GOLD: We were providing grants. We were providing loans. We were providing subsidies across the board.
ARABLOUEI: And the aid from the United States continued even after the Korean War ended. And over the next few decades, the Taiwanese used this support to help transition the island from a farming-based economy to one that depended on industry - mainly factories that assembled goods like clothes, toys, bikes and small electronics.
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UNIDENTIFIED REPORTER #15: In 10 years, more than 6,600 new factories of all kinds have been built and all are expanding and prospering. This mushrooming of industrialization has raised the foremost in standard of living to a place in the Orient, second only to that of Japan.
GOLD: You know, you have to look at this from a global perspective. At the same time, in the 1960s, the cost of labor in the U.S. was going up and American industrialists were looking for ways to save money. So labor was one thing. So they started looking for foreign investment opportunities abroad.
MALONE: And those industrialists looked to Taiwan with a growing infrastructure for factories, which for Taiwan, was great and all, but it wasn't going to be enough. If all they did was, you know, assemble products made in other countries, then Taiwan would remain stuck economically. They needed to level up. They needed to become the key dealer specifically for high-tech parts. And to do that, they were going to need foreign investment.
GOLD: So the government's role was, as a matchmaker, very aggressively, proactively started identifying foreigners, saying, why don't you come to Taiwan?
MALONE: Which brings us back to the man called the father of the Taiwanese miracle, K.T. Li.
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GOLD: He took the risk of coming with the government to Taiwan because he didn't want to stay in China under the Communists. But he also didn't go to Hong Kong or Japan or the U.S. He was committed to Taiwan.
MALONE: K.T. Li was born in Nanjing, China, in 1910. He spent many years working on the mainland before fleeing to Taiwan. And he was really good at being a technocrat. He held a bunch of jobs in the Taiwanese government and helped guide Taiwan's economy from farming to industry. By 1976, when Miin Wu started his career in Silicon Valley in the U.S., K.T. Li and others were in Taiwan thinking about how computer chips and semiconductors could transform the island. And that's also around the time that sociologist Tom Gold met K.T. Li.
GOLD: He told me that he was teaching a class at National Taiwan University - which is the premier university - every Saturday morning for three hours. And he was going to invite the leading entrepreneurs and government officials and planners and journalists and professors to talk about their experience with Taiwan's rapid economic development.
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UNIDENTIFIED PERSON #1: (Speaking Chinese).
GOLD: So every Saturday morning, I would go to this class, which was conducted in Chinese.
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UNIDENTIFIED PERSON #1: (Speaking Chinese).
GOLD: He was slim, under 6 feet tall, had - as I recall, he had a prominent nose, pretty nice looking, handsome, older man. He was - I'd say, maybe in his 60s or 70s. He seemed very sober, very levelheaded, the sort of guy you could trust right away. Not a showboater. He was obviously very diplomatic in his ability to work with a, you know, a military - militarized authoritarian government as well as foreigners. And he was somebody who understood what the potential of Taiwan was.
MALONE: He had this vision of Taiwan being a technological hub in East Asia.
GOLD: Taiwan had to advance to the next stage. And that was going to be technologically intensive industries.
MALONE: But you can't build a tech industry without engineers. And by the late '70s, many Taiwanese engineers had left and gone abroad.
GOLD: A lot of the people who graduated from engineering schools in Taiwan felt that their future really didn't lie in Taiwan. So a lot of them came to the U.S., and they started working for companies like Texas Instruments and companies in Silicon Valley, which was just getting going.
ARABLOUEI: So what did K.T. Li do? He crossed over the Pacific to try and bring them back.
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ARABLOUEI: Coming up, K.T. Li's vision meets Miin Wu's ambition, and Taiwan changes forever.
CLARK FAIR: Hello. This is Clark Fair (ph) from Homer, Ala. As an avid purveyor of history, I very much appreciate THROUGHLINE and the skill with which its hosts connect the dots between the past and the present. Thank you.
UNIDENTIFIED PERSON #2: Part Two - The Perfect Client.
ARABLOUEI: By the mid-1980s, Miin Wu was a successful engineer.
WU: We already in California for 12 years.
ARABLOUEI: He was about 40 years old. He married his girlfriend. Remember the one he went to Montreal for? And they had had a couple kids. He was working at Intel. All in all, most people would consider this a success. But Miin wanted more. He wanted to start his own company, and so he did with a few of his friends.
WU: But very small. At that time, we have four people, five people to get started.
MALONE: What is the name of that company and what are you doing?
WU: Called Macronix Inc.
ARABLOUEI: Macronix Inc - it was a typical startup. They came up with ideas for new products and even made some.
WU: One product we know, we called a key finder. Do you know the key finder?
MALONE: Yeah.
WU: If your key lost, you know, you can whistle...
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WU: ...And then that device responds with a beep.
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WU: You know where they are. We are making a lot of money on that.
MALONE: Miin was proud of these things and he wanted Macronix to grow and make more products and even build factories to build those products. But to do that, he needed investment from venture capitalists.
WU: So I told my friend, I'd like to do it a little bit bigger. But in the U.S. at the time, the venture capital people, they want to invest into a company who specialize in design, software, things like that. But no more factories.
MALONE: U.S. companies were already outsourcing manufacturing, and high-tech assembly is extremely labor-intensive.
WU: You know, the VC company only look at return, right? If they put $1 million somewhere, they want to have $100 million back.
MALONE: While Miin was out there unsuccessfully trying to attract investment, K.T. Li was in Taiwan trying to convince investors to buy into Taiwanese companies that were trying to establish themselves on the island.
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ARABLOUEI: K.T. Li and his colleagues wanted to create a physical home for Taiwan's new technology industry, an industrial zone that would provide tax breaks and other incentives to companies that set up shop there. They found a spot in the northwest region of Taiwan, a small, unremarkable piece of land in the city of Hsinchu that was destined to become Taiwan's Silicon Valley.
GOLD: You know, it looks rolling hills. And it's green. And it's clean. And it's going to look more like Palo Alto than it looks like, you know, just a barren, cement desert.
MALONE: There was energy, momentum, productivity, and it worked.
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UNIDENTIFIED REPORTER #16: Hsinchu Science Park is sometimes called the Silicon Valley of Taiwan.
MALONE: By 1989, after a decade of being established, Hsinchu Park housed more than 100 businesses, employed more than 16,000 people, and sold $1.75 billion in products.
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UNIDENTIFIED REPORTER #17: New statistics from the finance ministry revealed the impact of Hsinchu Science Park on the changing geography of wealth in Taiwan.
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ARABLOUEI: Meanwhile, K.T. Li was pulling out all the stops trying to lure Taiwanese engineers back home.
GOLD: Taking delegations to Silicon Valley and Route 128 outside Boston and Austin, where you had Texas Instruments, bringing these people from Taiwan together and saying, look, we realize that, you know, you're facing these glass ceilings in the United States, but if you come back to Taiwan, you know, we will supply you with laboratories. We'll supply you with all of the infrastructure that you need. We'll supply you with engineers. We'll find loans. We'll invest with you. You know, we'll go joint ventures with these things. We'll find foreign partners. And we won't make political demands on you.
ARABLOUEI: It was kind of an easy sell.
GOLD: A lot of them felt that they were coming up against a glass ceiling. They were never going to be the CEO. They were never going to be the top management because they were not white, because they - English was not their first language, because they were immigrants. But if you come back to Taiwan, we're creating a new industrial park. So that's where a lot of people - engineers went back and formed the whole new class of entrepreneurs who are the ones who pushed Taiwan into the, say, the new electronics, computer, high-tech stage.
WU: That's also the reason for me to go back to Taiwan.
MALONE: Miin Wu was one of those engineers who answered the call.
WU: At the time, Taiwan is in the starting boat.
MALONE: He never met K.T. Li personally in the U.S., but Miin saw the opportunity in Taiwan, clear as day.
WU: You know, I'm from Taiwan, so I have many alumni and friends in this field.
MALONE: Miin bought into the vision, and he had his own, the thing that he had been obsessed with since college. He wanted to open his own semiconductor factory in Taiwan. And so...
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UNIDENTIFIED PERSON #6: We're looking forward to making your journey a pleasant and comfortable one.
MALONE: ...He jumped on a plane.
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MALONE: So how often are you going back-and-forth between North America and Taiwan before you start your business in Taiwan?
WU: Once a month.
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UNIDENTIFIED PERSON #6: Ladies and gentlemen, we are now descending into Taiwan Taoyuan International Airport.
WU: I personally fly into Taiwan and talking to VC people. Within a year, I almost traveled 12 times. Every month, I was in Taiwan. Think about it. From San Francisco to Taipei and the economy class - once a month. That a torture, OK? (Laughter). So I stayed in this hotel. Even they know me. My friend can use my name to get discount from the hotel.
ARABLOUEI: The Taiwanese government had established various partnerships to find money for tech entrepreneurs in Taiwan, including with American VC firms. This irony wasn't lost on Miin Wu.
MALONE: So you had to go all the way back to Taiwan to get an American venture capital person interested in you?
WU: Yes, that's correct. Twelve times.
MALONE: Twelve times. That's right.
ARABLOUEI: In this process, he did scrape up some investment, but none of it was enough to build a factory. Remember, factories are expensive, and semiconductor factories are even more expensive to make. They take years to build. They're these massive facilities with clean rooms that have to be more sterile than an operating room to prevent any dust or dirt from getting into the semiconductor. So while he laid the groundwork for that, Miin needed to come up with another way into the industry, and he found the perfect client.
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JOEL LOY: This boy is doing more than just playing a video game. He has entered another world.
MALONE: Oh, yeah. Nintendo.
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BILL O'REILLY: Nintendo is, well, almost the most fun a kid can have.
ARABLOUEI: The original 8-bit system, the one where you had to blow on the cartridge, and somehow that seemed to make it work.
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HUGH DOWNS: It may be the most addictive toy in history.
MALONE: That Nintendo was just getting big in the 1980s. Millions of them were being sold.
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UNIDENTIFIED REPORTER #18: In just three years, they've sold more than 11 million hardware units at about a hundred bucks each.
MALONE: And like most computer systems, semiconductors were critical to making video game consoles like Nintendo's. The only problem was that the U.S. and Japan were in trade wars during the 1980s, and Japan was making the chips for Nintendo.
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ROBERT MACNEIL: With the U.S. economy sinking, there is growing pressure in this country to get a better trade deal with the Japanese.
JIM LEHRER: And that's not going to be easy because of the different way each country views both the causes and the cure.
ARABLOUEI: But after a bunch of pressure from American businesses and a tense negotiation, the Japanese eventually agreed to open up its chip market to American companies, and Miin was like, I'm getting in on this. It's a little complicated, but basically, what he did is he took advantage of the fact that he'd set up businesses in both the U.S. and Taiwan, and he snatched those Nintendo contracts right up.
WU: I'm the only U.S. company doing the read-only memory.
ARABLOUEI: He's talking about semiconductors.
WU: I'm the only one. So they have to buy from me.
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ARABLOUEI: But he still didn't have a factory to actually make semiconductors. Yeah, I know. It's weird that he gets a deal to deliver semiconductors for Nintendo, but he still can't actually make them.
MALONE: So whose semiconductors actually ended up in the Nintendos that were then shipping to the United States?
WU: At that time? The biggest company, called Samsung.
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MALONE: Oh, they're Samsung's (laughter).
WU: We are buying Samsung and then selling to them, OK?
MALONE: Miin Wu came up with the ultimate scheme. Basically, he was buying Korean semiconductors from Samsung to sell to the Japanese, using a Taiwanese company that, through a technicality, was able to appear as an American company and funding it all with the VC money he'd gotten in Taiwan. I know. It is a lot. And the scheme allowed him to start raising funds to actually build his own factory in Taiwan.
ARABLOUEI: And at that point, is Nintendo your biggest client?
WU: Yes. Still - even today, still No. 1.
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MALONE: Coming up, Miin Wu builds his factory. Taiwan builds an industry. And China takes notice.
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RAY LYLE: Yes, this is Ray Lyle (ph) from Chattanooga, Tenn. You're listening to THROUGHLINE on NPR.
UNIDENTIFIED PERSON #1: Part 3 - The Miracle.
ARABLOUEI: It was 1989. Miin Wu's scheme to raise money for his semiconductor factory was working. He'd left behind Silicon Valley to go all in with Taiwan's Hsinchu Park. But when he arrived, it wasn't like there was a bro-y (ph), sunny office with cold brew on tap waiting for him.
WU: I come back to Taiwan, and then I only find a desk. OK, I don't have even my office. I have - I borrow a desk from friends.
MALONE: Was it a nice desk at least? Or no, not...
WU: No, just a desk.
ARABLOUEI: (Laughter).
WU: Yeah. That's how I get started.
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UNIDENTIFIED PERSON #2: The government of Taiwan is actively wooing its sons and daughters home. Its two offices in California maintain data on nearly 3,000 engineers and computer scientists, information they make available to Taiwanese talent scouts.
ARABLOUEI: Miin Wu was his own talent scout. For months, he'd been recruiting other engineers, people like him who were originally from Taiwan or Hong Kong, to establish Macronix Inc. in Taiwan. He came with his flashy sales pitch and his own firsthand experience of being belittled and dismissed because of his English.
WU: One of the reason is - again, is related to the language because language is the ceiling for those excellent engineers to grow.
ARABLOUEI: Here's a passage from an LA Times article from 1989 about Silicon Valley's reverse brain drain to Taiwan.
UNIDENTIFIED PERSON #2: (Reading) Other government agencies sponsor five seminars a year, each in Los Angeles, San Francisco, Houston, Seattle and New York, on high-tech career opportunities in Taiwan. In addition, they place recruiting ads in Chinese-language newspapers, such as a recent ad portraying an elephant separated from its herd and the plea, come home.
ARABLOUEI: The allure was obvious.
WU: In the U.S., they have no opportunities. I can recruit those senior people back to Taiwan because they can grow. You know, I recruit several people I know. But then from them, I look into more. And then this is the first time I bring those people back to Taiwan. So that was reverse brain drain.
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ARABLOUEI: Yeah. How many brains did you drain from the U.S. when you went back? Like, how many people did you bring with you?
WU: In couple years, actually, 40.
MALONE: Forty?
ARABLOUEI: Forty?
WU: Four, zero - 40
ARABLOUEI: Whoa. Was there a part of you in the back of your head, though, that was worried that you're selling this to people who have established careers here as engineers, and you're like, what if this doesn't work? What if we go back to Taiwan, start this company, and it fails?
WU: No.
ARABLOUEI: Were you worried...
WU: We will make it work. We will make it work. That's why - that's where, you know, determination, right? You know, I mean, as a startup, as a entrepreneur, you cannot think about the dark side - right? - because if you think too much, you will have a hard time to start anything because to start up anything will require a risk.
ARABLOUEI: Miin was willing to take this risk because he knew that semiconductors were the future.
WU: So when you have risk, you cannot see - always thinking about the bad part. They know there's a potential to fail. But the only thing I do is try to make happen.
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MALONE: It may be tempting to view Miin's story or Taiwan's march toward successes as merely a story of determination, intelligence, grit. And it was that. But the reality is, K.T. Li's strategy of wooing talent back to Taiwan was facilitated by a lot of support from foreign countries, including the United States.
GOLD: The new capitalist class were very dependent on the government, and the government itself was very dependent on American assistance.
MALONE: This is Tom Gold again.
GOLD: So the role of the government in the economy and somebody like K.T. Li were critical.
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ARABLOUEI: The United States and other foreign countries invested in Taiwan. American investment firms set up joint ventures with the Taiwanese government to build up the island's technology firms. And while the politics could get complicated, the U.S. generally supported Taiwan's democratization. The U.S. was invested there, and a lot of countries benefited from the Taiwan miracle.
GOLD: They want to be indispensable. And when I mentioned before about moving up the value chain, Taiwan moved up from labor-intensive things to high-tech industries.
ARABLOUEI: Miin Wu eventually raised over $80 million from venture capital firms in Taiwan.
WU: So I built, for factories, 6 inch fab in park. I started running full.
ARABLOUEI: He was at the forefront of a revolution. By the late 1990s, semiconductor factories were popping up all over Taiwan.
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UNIDENTIFIED PERSON #1: Hey there, cube heads. Wake up. You know that $49.95 check that Granny sends you? You know that that'll get you your very own Nintendo Entertainment System. Get one and you can play the new Mega Man 6 and battle evil robots.
ARABLOUEI: Now that he was making his own semiconductors - the highest quality, he would add - Miin's deal with Nintendo got bigger and bigger. Eventually, Macronix International in Taiwan became the largest supplier of semiconductors to Nintendo.
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UNIDENTIFIED PERSON #2: Get the NES. You have watched too much TV already.
MALONE: I got one of these guys here. Do you recognize this here?
WU: Nintendo. Yes.
MALONE: Yes. I have...
WU: This a Switch.
MALONE: This is a Switch.
WU: Yes.
MALONE: How many of your semiconductors roughly are in this guy here?
WU: Well, every year I'm shipping about hundred million unit to them.
MALONE: This is Zelda: Breath Of The Wild. So this is the best video game ever made. And you're telling me one of your semiconductors is inside the best video game ever made?
WU: Or maybe two, and another one could be controller. And both from me.
MALONE: Amazing.
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WU: In 10 years, in the - when I start my company, in 10 years, I grow from zero to $1 billion U.S. dollar in 10 years. I was the first Taiwanese businessman on the cover page of the Forbes.
UNIDENTIFIED PERSON #3: We mixed a U.S. technology base with Taiwanese manufacturing technology, explains Wu. Today, Macronix has a stock market capitalization of $2 billion. Hsinchu Park marked a turning point. Located near top universities and government research institutes and offering low-cost land, green vistas and a minimum of bureaucracy, the technology park helped to reverse Taiwan's brain drain. Today, Hsinchu Park, with more than 200 companies and 72,000 workers, is overflowing.
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MALONE: By the start of the 21st century, Taiwan's transformation into a technological powerhouse was complete. The technocratic vision of K.T. Li worked. Today, Taiwanese companies control almost all of the world's supply of advanced semiconductors, and Macronix Inc., Miin Wu's company, is valued at close to $55 billion.
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ARABLOUEI: Taiwan's success makes it one of the most strategically important places on Earth. It's a blessing and a curse, protection and attention. If the supply of semiconductors gets janky, then it could have a devastating effect on the economies of countries like the U.S. or China. As you can imagine, this only heightens the drama between the two.
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UNIDENTIFIED REPORTER #19: Now, tensions between the U.S. and China over Taiwan are peaking. In the latest, Beijing has now issued fresh warnings on the issue.
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SASA PETRICIC: China's guns exploded with anger once again near Taiwan. More war games after another U.S. congressional delegation landed in Taipei.
ARABLOUEI: Some experts are now saying that China's behavior suggests that they might be willing to do anything to take over Taiwan.
GOLD: Taiwan, they consider a province of China that was stolen by the Japanese and then occupied by the government that lost the civil war, and then protected by the United States, which which is preventing it from being reincorporated into China.
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UNIDENTIFIED REPORTER #20: Beijing's communist leadership claims the democratic island as its own and threatens to unify Taiwan with the mainland by force.
GOLD: So the PRC referred youth talks about reunification when they talk in English - in Chinese, it just means unification - reunification. But the people in Taiwan say Taiwan has never been part of the People's Republic of China. So you can't reunify us because we've never been unified by you. You know, it walks like a duck and quacks like a duck, but nobody dares call it a duck. And Beijing gets really angry if people sort of give Taiwan credibility as an independent sovereign country, and the U.S. under Trump and now is continuing to really raise the profile of Taiwan in American global politics. China's attitude is if we take - invade Taiwan, we're not invading a sovereign country. There is no sovereign country called Taiwan, and hardly anybody recognizes the Republic of China as a sovereign country. It's not a member of the U.N., you know, so don't tell us what to do. It's purely a domestic matter.
MALONE: But at the same time, China does lots of business with Taiwan. They buy Taiwanese computer chips just like the rest of the world. And so there is an argument that because Taiwan has made itself a semiconductor powerhouse, invading Taiwan would be irrational for China.
ARABLOUEI: We ran this theory by Tom Gold.
GOLD: What is rationality? You know, what - we may think something that somebody is doing is crazy, but in terms of their frame of reference, it's perfectly logical, perfectly rational. And don't tell us what to do. And that, you know, the Chinese attitude is, well, the U.S. created the post-World War two international system. And yeah, we've done really well with it, but the time for American hegemony has passed. And it's, you know, we don't want a superpower running the world and telling us what to do. And we're going to go our own path, you know, and that's rational from our standpoint.
ARABLOUEI: That's it for this week's show. I'm Ramtin Arablouei.
MALONE: And I'm Kenny Malone.
ARABLOUEI: This has been a special collaboration between Planet Money and THROUGHLINE. Thanks for doing this, Kenny.
MALONE: It is absolutely my pleasure. Thanks for letting me be here.
ARABLOUEI: Per usual, this episode was produced by Rund, me and the amazing THROUGHLINE team, which includes...
LAWRENCE WU, BYLINE: Lawrence Wu.
JULIE CAINE, BYLINE: Julie Caine.
ANYA STEINBERG, BYLINE: Anya Steinberg.
YOLANDA SANGWENI, BYLINE: Yolanda Sangweni.
CASEY MINER, BYLINE: Casey Miner.
CRISTINA KIM, BYLINE: Cristina Kim.
DEVIN KATAYAMA, BYLINE: Devin Katayama.
SANJUKTA PODDAR, BYLINE: Sanjukta Poddar.
ARABLOUEI: Fact-checking for this episode was done by Kevin Volkl. Thanks to Irena Hwang and Sam Yellowhorse Kesler for their voiceover work. Thanks also to Micah Ratner, Tamar Charney and Anya Grundmann. Special thanks to NPR reporter John Ruwitch for helping us get this story right. And extra-special thanks to Kenny Malone for co-hosting, and to Jess Jiang, Sam Yellowhorse Kesler and the rest of the Planet Money team. If you don't already subscribe to Planet Money, you definitely, definitely should. They have amazing episodes, including one on the history of a carried interest loophole in the American tax system. They manage to make anything in economics interesting. This episode was mixed by Josh Newell. Music for this episode was composed by me and my band, Drop Electric, which includes...
ANYA MIZANI: Anya Mizani.
NAVID MARVI: Navid Marvi.
SHO FUJIWARA: Sho Fujiwara.
ARABLOUEI: And finally, if you have an idea or you like something you heard on the show, please write us at throughline@npr.org or hit us up on Twitter at @throughlinenpr. Thanks for listening.
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