Hsinchu, Taiwan – July 6, 2025 – Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading contract chipmaker, has announced its exit from the Gallium Nitride (GaN) wafer foundry business by July 31, 2027, as part of a strategic pivot toward advanced packaging technologies. The decision, driven by market dynamics and low profitability in GaN production, marks a significant shift for the company as it reallocates resources to meet growing demand for cutting-edge semiconductor solutions.
Why TSMC is Stepping Away from GaN
TSMC cited intense competition from Chinese foundries and the limited scale of its GaN operations as key factors in the decision. GaN, a wide-bandgap semiconductor material, is valued for its efficiency in power electronics, particularly in applications like electric vehicles, renewable energy systems, and fast chargers. However, TSMC’s GaN production, primarily at its Hsinchu Fab 5, constitutes a small fraction of its portfolio—approximately 3,000 to 4,000 6-inch wafers per month. According to industry analysts, GaN’s low profit margins, combined with price pressure from Chinese competitors, have made the segment less viable for TSMC’s long-term strategy.
A TSMC spokesperson stated, “The GaN wafer foundry business no longer aligns with our focus on high-growth, high-margin opportunities. We are committed to supporting our clients through a smooth transition while redirecting our resources to advanced technologies.”
Transition to Advanced Packaging
TSMC plans to repurpose Fab 5 for advanced packaging technologies, including Chip-on-Wafer-on-Substrate (CoWoS), Wafer-on-Wafer, and Wafer-Level System Integration, starting July 1, 2025. These technologies are critical for high-performance computing applications, such as AI accelerators, 5G infrastructure, and next-generation GPUs, where TSMC sees stronger growth potential. The company’s recent financial guidance projects a robust 24–26% revenue growth for 2025, underscoring its confidence in this strategic shift.
Impact on Clients and Industry
TSMC’s largest GaN client, Navitas Semiconductor, has already secured an alternative supplier in Powerchip Semiconductor Manufacturing Corp (PSMC). Navitas plans to transition its 100V GaN products to PSMC, with production expected to commence in mid-2026. TSMC is facilitating a smooth handoff by offering a last-time buy option for clients, allowing them to secure GaN wafer supplies through the end of July 2027.
Industry observers note that TSMC’s exit could reshape the GaN market, potentially benefiting competitors like PSMC and Chinese foundries. However, TSMC’s dominance in advanced nodes (3nm, 2nm) and packaging ensures that the financial impact of exiting GaN will be minimal. “TSMC’s focus on advanced packaging aligns with the industry’s shift toward heterogeneous integration,” said Dr. Wei-Chen Lin, a semiconductor analyst at Taipei-based Market Intelligence & Consulting Institute.
Broader Market Context
The decision comes amid broader challenges in the GaN market, including oversupply and price erosion driven by Chinese manufacturers. Posts on X have highlighted TSMC’s strategic recalibration, with some users noting that GaN’s niche status and high capital costs make it a less attractive segment for a company of TSMC’s scale. Meanwhile, TSMC’s pivot to advanced packaging reflects the growing importance of chiplet-based architectures and AI-driven demand.
Looking Ahead
TSMC’s exit from GaN underscores its disciplined approach to portfolio management, prioritizing segments with higher growth and profitability. As the company ramps up investments in advanced packaging and next-generation nodes, it remains well-positioned to maintain its leadership in the global semiconductor industry.
Sources:
- TSMC Press Release, July 6, 2025
- Navitas Semiconductor Investor Update, July 2025
- Market Intelligence & Consulting Institute, Semiconductor Market Report, Q2 2025
- Social media Platforms Discussions, accessed July 6, 2025
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