Taiwan Semiconductor Manufacturing Company (TSMC) plans to discontinue its gallium nitride (GaN) chip operations within the next two years.

The decision follows an assessment of market conditions and aligns with the company’s long-term strategy.

As the world’s largest contract chipmaker, TSMC cited increased competition from Chinese investments in GaN production.

This competition has led to lower global prices, affecting profitability.

TSMC initially produced GaN using six-inch and eight-inch fabrication facilities. However, rising competition has influenced its decision to exit the market.

The announcement coincides with US-based Navitas Semiconductor’s plan to transfer its GaN orders to Powerchip Semiconductor Manufacturing Corp. (PSMC) in the coming 12 to 24 months.

The company also confirmed that this decision will not impact its sales forecast for 2025. It anticipates growth of 24-26% in US dollar terms.

🔗 Source: Focus Taiwan

🧠 Food for thought

1️⃣ Strategic resource allocation drives semiconductor industry survival

TSMC’s decision to exit the GaN market demonstrates how leading semiconductor manufacturers must constantly reallocate manufacturing capacity toward higher-margin technologies to remain competitive.

While TSMC is ending GaN production due to Chinese price competition, the company simultaneously forecasts 24-26% growth in sales for 2025, showing their confidence in redirecting resources to more profitable segments1.

This reflects the broader economics of semiconductor manufacturing, where a competitive fab costs approximately $3 billion to build, resulting in depreciation costs of roughly $1 billion annually2.

Even market leaders must make tough choices about which technologies to support, especially when facing price erosion in specific segments, explaining why TSMC plans to repurpose its GaN production facilities for advanced packaging technologies3.

The semiconductor industry has historically been defined by such strategic pivots, as seen when AMD transitioned to a fabless model in 2009, divesting its manufacturing to create Global Foundries due to similar economic pressures2.

2️⃣ China’s semiconductor strategy reshapes global markets