Taiwan Faces Fierce Competition as China Dominates Legacy Chip Market

In recent years, Chinese foundries have rapidly gained market share in the legacy chip industry, challenging Taiwanese dominance. With strong government backing, Chinese companies offer steep discounts, pushing Taiwanese firms to innovate or specialize. Amid U.S.-China tensions, global semiconductor dynamics are shifting, prompting strategic adjustments among Taiwanese manufacturers.

In a strategic shift that is reshaping the semiconductor landscape, Taiwanese chipmakers are encountering formidable challenges as Chinese foundries aggressively capture market share in the legacy chip sector. Initially entering the Chinese market to tap into lucrative opportunities, Taiwan's Powerchip Technology now finds itself in a competition intensified by China's localisation policies. Leading Chinese foundries like Nexchip are utilizing government support and lower margins to undercut Taiwanese prices, stirring concerns among industry leaders.

Amid this transformative period, Taiwanese chip firms are adapting strategies to withstand the ongoing price wars. Powerchip, UMC, and Vanguard International are being forced to retreat from traditional markets or pursue more advanced chipmaking processes. This comes in response to the rapid expansion of production capacity by Chinese companies—a trend that has sparked an investigation by the Biden administration. The semiconductor sector is watching closely as the implications of these shifts unfold across the global stage.

While some relief could stem from geopolitical tensions between the U.S. and China, leading to a split in supply chains, Taiwanese executives stress the need for innovation. As Chinese competitors ramp up legacy chip production, Taiwanese firms are focusing on emerging technologies such as 3D stacking to maintain an edge. The reality of 'Made in China' driving client decisions further complicates the competitive landscape, necessitating that Taiwanese chip designers and manufacturers reconsider their positioning in light of evolving global demands.

(With inputs from agencies.)