At chip giant Broadcom, CEO Hock Tan has used iron-fisted management and precise mergers and acquisitions to push a mediocre semiconductor company to a market value of one trillion U.S. dollars, and its stock price has soared nearly seven times in the past three years. On December 5, the technology media The Information wrote a long article telling the story of Broadcom and its iron-fisted CEO Chen Fuyang.


The next Jen-Hsun Huang


The article pointed out that the 74-year-old CEO is known for his extremely pragmatic style-abolition of benefits, strict cost control, focusing on profits, and becoming one of the few challengers to Nvidia in the AI ​​chip market through customized chip business.

According to reports, after spending $84 billion to acquire VMware, Chen Fuyang used his signature "coffee chat" to announce his management philosophy to new employees.

When an employee asked Broadcom whether it provided childcare, marriage counseling and other benefits, he replied: "Why should I do that? I'm not your father."


Hock Tan chatted and laughed with the President of the United States

In the following months, about half of VMware's 38,000 employees were laid off, leaving only 5 of the 18 office buildings and even the coffee machines removed.

This ruthless efficiency has brought real performance growth to Broadcom. The company's sales exceeded US$50 billion last year, growing by more than 50% within two years, and are expected to exceed US$60 billion this year.Its custom chip business has won important customers such as Google, OpenAI and Meta, accounting for about 60% of the company's revenue, making Broadcom one of the 11 trillion-dollar companies in the world.

The article also pointed out that the risks are equally significant.Whether AI spending is sustainable, competitors such as Marvell catching up, and customers seeking cheaper alternatives may all shake Broadcom's position.Under the new salary structure, Chen Fuyang himself will receive equity awards worth approximately US$700 million if he can increase AI revenue to US$120 billion by the end of 2030. The current market generally believes that he can achieve this goal.

The "Diamonds and Junk" Philosophy of the M&A Machine

The article stated that Chen Fuyang has acquired at least 11 companies in the past 15 years and applied the same rigorous methodology in each integration. Billionaire Philippe Laffont, co-founder and head of hedge fund Coatue Management, summed it up:

"He is the absolute best at identifying interesting M&A targets, acquiring them and applying a private equity-style playbook."

Chen Fuyang himself described this method as identifying "diamonds" and "junk". After acquiring VMware, he pared his product portfolio from 8,000 to just four, retaining the product lines he believed would be most useful to data center customers.

He spun off VMware's workplace virtualization tools division and, after trying to sell the Carbon Black cybersecurity business, folded it into Symantec -- but not before laying off about 80% of its staff.

Within the company, Chen Fuyang established a ruthless performance evaluation mechanism. At quarterly all-hands meetings, he would show a slide that ranked the divisions by revenue growth, with a red line marking the weakest third of the division. He calls it the "doom line" - any department that falls below it for several consecutive quarters is considered underperforming, and employees fear they will be next in line for layoffs.


Chen Fuyang

Despite this uncertainty, Broadcom's voluntary attrition rate is just 2.9%, slightly higher than Nvidia's 2.7%. Multiple former employees attributed this to the company's high compensation, which included a large number of valuable restricted stock units.

Companies rarely hire interns or recent graduates, preferring to hire one experienced engineer to do the work of several junior employees. Unlike many technology companies, which have hundreds of vice presidents, Broadcom has fewer than 30 vice presidents and senior vice presidents.

Additionally, at the company's closest Palo Alto headquarters, there are no free sodas and even stationery is in short supply. "You had to buy your own rubber bands or markers," said one former employee, "and you better remember to bring them back to your desk or they'd be taken away."

Custom chips: Nvidia’s challenger

The article reads,After the launch of ChatGPT, Broadcom's chip business, once considered dull and slow-growing, gained new life almost overnight.The company focuses on custom chips, known as application-specific integrated circuits (ASICs), which are designed to perform a single task and are more efficient and cheaper than Nvidia's general-purpose chips. That makes Broadcom one of the few credible challengers to Nvidia's dominance in the chip market.

Google is Broadcom’s best-known old customer and has been cooperating with it since 2016. Typically customers bring chip blueprints to Broadcom, which handles the physical design and manufacturing, working with companies such as TSMC. Broadcom's level of involvement varies depending on the partnership - Google handles more high-level technical design due to its expertise, while Broadcom also assists in this part of the work with other companies.


In the past three years, Broadcom has signed a number of large orders, including cooperation with OpenAI and Meta. In February last year, Chen Fuyang was appointed to Meta’s board of directors. According to sources, Microsoft is also currently in discussions with Broadcom about designing future chips, which may mean that Microsoft will transfer business from Marvell, another custom chip manufacturer.

While companies could work directly with chip foundries such as TSMC and handle all chip designs themselves, doing so would be riskier. Broadcom has been involved in chip design for three decades and has a reputation for the quality of its custom products, allowing it to charge high prices. However, high costs have prompted some customers to seek alternatives.

Previously, Broadcom's aggressive negotiating tactics prompted Amazon to turn to rival Marvell, while Google also added Taiwan's MediaTek as a second chip design partner.

Chen Fuyang predicted in December last year that AI may bring $60 billion to $90 billion in new revenue to Broadcom in 2027. JP Morgan estimates that the chip collaboration with OpenAI announced in October could generate as much as $300 billion in revenue over the next few years.

In October, Anthropic said it planned to use 1 million tensor processing units (TPUs)—chips that Broadcom co-designed with Google. Meta is also currently in talks with Google, planning to invest billions of dollars in using TPUs in its data centers by 2027.

The iron-fisted road from Malaysia to Silicon Valley

Little is known about Chen Fuyang himself.

He grew up in Penang Island, Malaysia, and his family was not wealthy. The context of his early life was the Malayan Emergency - a violent guerrilla war between British colonial troops and pro-independence "rebels".

As a teenager, Chen Fuyang originally wanted to become a doctor, but his high SAT score won him a scholarship to the Massachusetts Institute of Technology, which changed the trajectory of his life. He arrived in the United States in 1971 and received bachelor's and master's degrees in mechanical engineering in 1975. He then earned an MBA from Harvard University and held finance positions at General Motors and PepsiCo.

In the 1980s, he worked in Asia for nearly ten years, working for a building materials group in Malaysia and an investment company in Singapore.After returning to the United States, he served as vice president of finance at PC maker Commodore International before it went bankrupt, then rose to become CEO of Integrated Circuit Systems, leading the company through a major restructuring and its sale in 2005 for $1.7 billion.


Hock Tan and his wife

The deal caught the attention of Silver Lake and KKR. In 2006, the two companies hired Chen Fuyang to lead Avago, the chip company spun off from HP, and asked him to cut redundancies.

A former executive recalled that during one of Avago’s early outings, Chen Fuyang loaded the senior executives onto a bus and took them to a local airport hotel. "Most people choose luxury places to go out and I don't think we even have food or water."

In 2016, Chen Fuyang completed his biggest move: acquiring the better-known Broadcom for US$37 billion.The following year, he launched a $120 billion hostile takeover of Qualcomm. But the Trump administration blocked the deal on national security grounds, fearing that Qualcomm, which was headquartered in the United States, would fall into the hands of Broadcom, which was registered in Singapore at the time. A month later, Broadcom moved its registration location to the United States.

After the Qualcomm deal failed, Chen Fuyang decided to seek growth by acquiring software companies. From 2019 to 2022, Broadcom's stock price rose by 150%, far exceeding the Nasdaq's increase of approximately 55%.

Who will take over?

Questions remain about the sustainability of Broadcom's AI chip business and overall AI spending, and 74-year-old Chen may soon face another long-term question: Who will succeed him?

In September this year, Chen Fuyang said during a quarterly earnings call that he planned to serve as CEO "at least" until 2030. A former Broadcom executive predicted that Chen would work until his death. "He's going to be the Charlie Munger of technology."

However, there are signs that Broadcom has begun to consider the post-Chen Fuyang era.Charlie Kawwas, president of Broadcom's Semiconductor Solutions Group, has been appearing more frequently at events and earnings calls for Wall Street recently.

Kawwas, who holds a doctorate in electrical and computer engineering, joined the company in 2014 through Broadcom's acquisition of LSI Corp. and served as chief sales officer and chief operating officer before being promoted to president in 2022.

In a podcast conversation posted to the OpenAI YouTube channel in October, Kawwas sat to Chen's right as he spoke with OpenAI CEO Sam Altman and President Greg Brockman.

Kawwas emphasized that he speaks with his OpenAI counterpart at least once a week. "I feel like every time I call Charlie, he's in different parts of the world trying to secure capacity and trying to find ways to help us achieve our goals together," Brockman praised.

But if Broadcom investor Laffont's views are any indication, many aren't ready to let go of the longtime leader. "Every day I think about him and I pray that he takes his vitamins and eats healthy," Laffont said.

Silver Lake Chairman Ken Hao is a Broadcom director who has known Chen Fuyang for 20 years. He believes that the key to Chen Fuyang's outstanding performance lies in "focusing on first principles that do not come from traditional wisdom, or in other words, not copying others."