tsmc exits gan market amid tariff pressures

2025-07-09 tsmc

Hsinchu, Wednesday, 9 July 2025.
tsmc, the world’s leading semiconductor foundry, is reportedly discontinuing its gallium nitride (gan) production. the decision arrives after taiwan’s exclusion from the u.s. ‘reciprocal tariff list’. the gan production lines, located in hsinchu science park, will be shut down starting next year. navitas semiconductor announced that tsmc will terminate gan wafer foundry business by july 31, 2027. this strategic shift could reshape the competitive landscape of the gan semiconductor market. the move is influenced by market dynamics and tsmc’s long-term business strategy.

strategic shift

TSMC’s decision to exit the GaN market reflects a strategic realignment toward advanced processes, high-performance computing (HPC), and artificial intelligence (AI) applications [1]. The company anticipates a revenue growth of 24% to 26% this year, driven by these core areas [1]. This move allows TSMC to concentrate resources on more profitable ventures amid increasing competition and pricing pressures in the GaN sector [2][3]. The company believes that focusing on areas with higher potential for growth and profitability aligns better with its long-term business objectives [1].

market dynamics and competition

The GaN market has become intensely competitive, with Chinese manufacturers like Innoscience offering products at prices below TSMC’s production costs [2]. This pricing pressure has made it difficult for TSMC to maintain its desired profit margins, which typically exceed 50% [3]. GaN chips are utilized in electric vehicles, 5G communications and fast charging [1]. While GaN technology offers advantages such as high voltage, high frequency, and low energy consumption, the increasing competition has eroded profitability for TSMC [1][3].

impact on manufacturing capacity

TSMC’s withdrawal from GaN production will lead to the shutdown of related production lines in Hsinchu Science Park [1]. Navitas Semiconductor, a U.S.-based GaN provider, has already announced that TSMC will cease GaN wafer foundry services by July 31, 2027, and is seeking alternative foundries like Powerchip Semiconductor Manufacturing Corp [1]. This shift in manufacturing capacity could create opportunities for other foundries to expand their presence in the GaN market. It may also impact the supply chain for GaN-based components in various applications [1].

geopolitical considerations

Taiwan’s exclusion from the U.S. ‘reciprocal tariff list’ has influenced TSMC’s decision [1]. GaN technology is strategically important in the U.S.-China tech rivalry, with applications in military radar, satellite communications, and 6G technology [2]. China has been strategically deploying GaN in military applications, creating a dual-use industry chain [2]. TSMC’s exit from the GaN market could affect the balance of power in the semiconductor industry, particularly concerning strategic technologies [2].

expert opinions and market outlook

Analysts suggest that TSMC’s move is a pragmatic decision to prioritize profitability and focus on core competencies [3]. While the GaN market holds potential, TSMC’s resources are better allocated to advanced processes and AI-related applications [7]. Some experts believe that Chinese companies may dominate the GaN market in the future due to their cost advantages, though this could lead to thinner profit margins overall [3]. ROHM, a Japanese semiconductor manufacturer and partner of TSMC in GaN, stated that the decision has no major impact [4].

stock implications

The news of TSMC’s exit from the GaN market may have a limited impact on its stock (TSM:NYSE), given that GaN contributed a small portion of its overall revenue [alert! ‘no source gives details of the stock prices’]. The company’s focus on advanced technologies and AI is expected to drive future growth and maintain investor confidence [1]. However, the decision highlights the increasing competitive pressures in certain segments of the semiconductor market and the need for companies to adapt their strategies to maintain profitability [2][3]. Investors will likely monitor how TSMC redeploys its resources and whether this strategic shift enhances its long-term financial performance [1].

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tsmc gallium nitride