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Taiwan’s Powerchip Technology once saw its partnership with Hefei in 2015 as a gateway to China’s market. However, its former joint venture, Nexchip, has now become a formidable rival in the legacy chip sector. With Beijing pushing for chip localization, Powerchip was forced to abandon its lucrative business of supplying integrated circuits for Chinese display panels.
China’s chip foundries, including Nexchip, SMIC, and Hua Hong, are aggressively expanding in the $56.3 billion mature-node chip industry. These companies, backed by strong government funding, are undercutting Taiwanese competitors like UMC and Vanguard International with steep discounts. Taiwan’s chipmakers are now shifting focus to advanced and specialty processes to maintain competitiveness.
Frank Huang, chairman of Powerchip, emphasized the urgency of transformation to withstand price wars with Chinese firms. UMC acknowledged industry challenges and is partnering with Intel to develop advanced chips. Meanwhile, Washington's trade policies could slightly ease Taiwan’s struggles, as global companies look to shift supply chains away from China. However, former U.S. President Donald Trump’s proposal for 100% tariffs on foreign-made chips could further shake the market.
China’s aggressive production expansion is reshaping global chip manufacturing. In 2024, China held 34% of mature-node capacity, compared to Taiwan’s 43%, but projections indicate China will surpass Taiwan by 2027. Chinese companies, including China Mobile and China Telecom, are also enforcing stricter local component use, further pressuring Taiwan’s chip industry.
To adapt, Taiwanese firms are prioritizing high-tech processes like 3D stacking and reducing reliance on display driver and sensor chips. While Powerchip retains a 19% stake in Nexchip, it no longer plays an active management role. With rising geopolitical tensions, Taiwanese chipmakers are increasingly receiving orders from customers seeking non-China manufacturing, a trend expected to accelerate.
