Taiwan's Chip Foundry Supremacy Wanes as U.S. and China Ramp Up Production

Taiwan may soon see its crown challenged as rivals China and the United States ramp up domestic production. According to TrendForce, a market research firm, Taiwan currently boasts a staggering 46% of global semiconductor foundry capacity, but that dominance is expected to decline to 41% by 2027.

China, currently holding 26% of the market, driven by aggressive government incentives and subsidies aimed at boosting domestic chip production. China pivots to mature chip technologies 28nm, compensating for advanced equipment roadblocks. This strategic shift could see China control 39% of mature chipmaking capacity by 2027, with potential for further growth contingent on smooth equipment procurement.

The US, with its 6% share, is also ramping up its chip game. The CHIPS Act, a recent bipartisan legislation, allocates billions of dollars to incentivize domestic semiconductor production and research. Major players like Intel and TSMC are already expanding their US operations, with the goal of reducing dependence on foreign foundries for advanced chips.

Fueling a chipmaking revival, Japan throws its weight behind Rapidus, aiming to conquer the 2nm frontier. An ambitious Hokkaido cluster and lucrative subsidies for JASM and JSMC aim to attract foreign chipmakers and reassert Japan's semiconductor prowess.

The shift in the global foundry landscape is driven by factors, including geopolitical tensions, supply chain disruptions, and the increasing importance of semiconductors in virtually every aspect of modern life. Governments are recognizing the strategic importance of chip manufacturing and are pouring billions into fostering domestic capabilities, seeking to reduce dependence on foreign suppliers.

This shift has significant implications for the global tech industry. A more diversified chip supply chain could lead to greater stability and resilience, but it could also raise concerns about competition and geopolitical tensions. The rise of China as a major player in the foundry market is likely to be met with scrutiny and concern from the U.S. and other Western countries.

The future of the chip market remains an open question. However, one can confidently predict an era of heightened competition, with Taiwan's historical monopoly facing significant challenges.