TSMC Founder Warns Against Layoffs, Citing Hidden Costs

TSMC founder Morris Chang has cautioned companies against laying off workers if there is a chance they will need to rehire them within a year, arguing that many executives overlook the real costs involved. Speaking about his experience leading Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, Chang said layoffs often create expenses that go beyond salary savings. His comments come at a time when many technology companies are cutting jobs while increasing investments in AI. Morris Chang said the "hidden maths" behind layoffs includes severance costs, training expenses and the long-term impact on employee trust.

Morris Chang: 'If in a year you have to hire people back, you shouldn't lay off'

The TSMC founder said companies should think carefully before reducing headcount during downturns. "If in a year you have to hire people back, you have to hire the laid off people back, then you shouldn't lay off," he said. According to Chang, separation costs alone can be significant. "The separation expense is usually heavy. About half a year. And it takes at least half a year to train a person," he said. He argued that when those costs are combined, companies may gain little from layoffs if they later need to rebuild the workforce.

Lessons from the 2009 financial crisis

Morris Chang's comments come from TSMC's experience during the global financial crisis in 2009. The company laid off around 700 employees based on performance ratings. The move later sparked criticism and protests, including demonstrations outside Chang's home. Chang said the decision raised questions about fairness because performance ratings are often subjective. "People would not respect us if we lay off by performance ratings," he said. He explained that performance reviews are conducted by individual supervisors, making the process open to differing judgments. Chang said one reason the layoffs were poorly received was that employees viewed performance ratings as subjective. "Performance reviews, the performance ratings are done by everyone's own supervisor," he said. He noted that hundreds of supervisors were responsible for the ratings used to identify workers for layoffs. According to Chang, that made it difficult for employees to view the process as fully objective. He further said that TSMC eventually brought back many of the workers who had been laid off.