Taiwan’s semiconductor industry, long dominant in the production of legacy chips, is now under pressure as Chinese firms aggressively expand their market share with lower prices and strong government support. In response, Taiwanese companies are considering a shift toward more advanced semiconductor technologies to stay competitive.
In 2015, Taiwan’s Powerchip Technology partnered with Hefei, China, to establish a new chip foundry, hoping to access China’s growing market. However, nine years later, that same Chinese foundry, Nexchip, has emerged as a major competitor, leveraging lower costs and China’s localization push. Chinese foundries such as Hua Hong and SMIC are gaining ground in the $56.3 billion mature-node chip market (28nm and larger). Their aggressive price-cutting and rapid expansion have put pressure on Taiwanese manufacturers like Powerchip, UMC, and Vanguard International, forcing them to either retreat or shift to more specialized and advanced semiconductor processes.
According to TrendForce, China held 34% of global mature-node chip production capacity in 2024, compared to Taiwan’s 43%. By 2027, China is expected to surpass Taiwan, further intensifying competition. Taiwanese chipmakers are moving toward specialized and advanced chip technologies. UMC has partnered with Intel to develop smaller, more sophisticated chips, while Powerchip is shifting its focus to 3D stacking, a technique that integrates logic and DRAM chips for better performance and energy efficiency.
The U.S.-China trade war has influenced the semiconductor industry significantly. The Biden administration has investigated China’s chip industry, while former President Donald Trump has threatened 100% tariffs on semiconductors made outside the U.S. These policies have pushed some Western companies to shift production away from China, benefiting Taiwanese firms.
At the same time, Beijing is ramping up efforts to strengthen its domestic semiconductor industry. Chinese companies like China Mobile and China Telecom are enforcing stricter requirements for using domestically made chips, reducing opportunities for Taiwanese firms in the Chinese market.
Taiwan’s legacy chipmakers are at a crossroads. With China’s aggressive expansion and U.S. trade policies reshaping the industry, Taiwanese companies must invest in cutting-edge technologies and explore new global markets to sustain their competitiveness.
Source: Reuters