Image credit: The Byteline

Taiwan’s legacy chipmakers are facing a shifting landscape as China aggressively eats into their market share, raising alarms in the semiconductor industry and prompting a strategic rethink.

Nearly a decade ago, Powerchip Technology saw an opportunity in China, partnering with the city of Hefei in 2015 to establish a new chip foundry.

The move was meant to give the Taiwanese firm a stronger foothold in the booming Chinese market. But today, that same foundry, Nexchip, has turned into one of Powerchip’s biggest rivals—offering deep discounts and thriving under Beijing’s push for semiconductor self-sufficiency.

Nexchip is just one of several fast-rising Chinese foundries—including Hua Hong and SMIC—that are chipping away at Taiwan’s dominance in the $56.3 billion legacy chip industry, which relies on older 28-nanometer technology and beyond.

The trend has drawn the attention of the Biden administration, which recently launched an investigation into China's pricing tactics.

Taiwanese players like Powerchip, UMC, and Vanguard International are now being forced to pivot as their traditional stronghold—chips used in cars and display panels—comes under pressure from China’s aggressive price cuts and rapid capacity expansion.

“Mature-node foundries like us must transform; otherwise, Chinese price cuts will mess us up even further,” said Frank Huang, chairman of Powerchip Investment Holding, whose listed unit, Powerchip Manufacturing Semiconductor Corporation, took shape after a 2019 restructuring.

UMC acknowledged the growing challenge, telling Reuters that the global expansion of chip manufacturing has created "severe challenges" for the industry.

The company is now collaborating with Intel to develop more advanced chips and move beyond its reliance on legacy technology.

One potential lifeline for Taiwan's chipmakers could come from geopolitical tensions.

As Washington and Beijing remain locked in a semiconductor battle, companies seeking to secure supply chains may opt for non-Chinese suppliers. However, any relief could be short-lived. U.S. President Donald Trump has said he plans to impose tariffs as high as 100% on semiconductors made outside the United States.

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