Taiwan's TSMC is withdrawing from the gallium nitride (GaN) power semiconductor market. The company aims to focus on advanced processes and packaging capabilities, which have been surging due to the blooming artificial intelligence (AI) market, amidst ongoing low-price offensives from Chinese corporations. TSMC plans to completely withdraw from the GaN power semiconductor business by 2027 and transition to advanced packaging (CoWoS) production lines.
GaN, or gallium nitride, has high power conversion efficiency. It can be installed in high-power facilities such as data centers to enhance energy efficiency and reduce expenses. It is reported that installing GaN semiconductors in data centers can improve energy efficiency by nearly 10%. TSMC began using GaN technology at its 6-inch wafer fab in 2014. In 2015, it expanded its business to include the production of low-voltage and high-voltage GaN components, and began mass production of GaN power semiconductors in 2017.
According to a report submitted to the U.S. Securities and Exchange Commission (SEC) on the 4th by power semiconductor corporation Navitas Semiconductor, TSMC, which produces GaN power semiconductors, plans to terminate its GaN wafer foundry business by the end of July 2027 and request mass production support for power chips. TSMC noted that this decision is based on its long-term business strategy. The space where the GaN semiconductor line was established is expected to be converted to an advanced packaging line.
TSMC's business withdrawal is analyzed to have been influenced by massive facility investments and low-price offensives from Chinese corporations. China, which is under U.S. export restrictions, has proactively invested in power semiconductors that utilize legacy (older) processes, which are relatively free from sanctions. Major Chinese corporations such as Sanan Optoelectronics and Innoscience are mass-producing GaN power semiconductors. The Korea Institute for Industrial Economics & Trade (KIET) explained, "In the GaN-based power semiconductor sector, there is not a significant technological gap compared to the U.S. and Japan, allowing China to create its own ecosystem based on its production capacity." The Taiwan Industrial and Commercial Times reported, "The low-price competition from Chinese corporations is demonstrating a significant burden on the silicon carbide (SiC) and GaN markets."
The surge in demand for advanced processes and packaging due to the blooming AI market has also influenced TSMC's strategy of focus and concentration. TSMC plans to begin mass production of 2nm (nanometer, one billionth of a meter) advanced processes starting this second half of the year. With ongoing orders from global big tech companies like Apple, Qualcomm, NVIDIA, and AMD, there is a situation of insufficient production capacity. TSMC forecasts that the 2nm process will reach full operational capacity within four quarters after mass production begins. TSMC's CEO, C.C. Wei, said, "The demand from customers for the 2nm process is unprecedented." This year, the advanced packaging CoWoS production capacity is expected to double from last year to 75,000 wafers per month and is projected to expand to 90,000 wafers next year.
An industry insider noted, "TSMC is currently struggling to respond to the concentrated demand for AI chips and must send existing personnel to operate the Arizona fab, where more than 100 trillion won has been invested, so it will significantly reduce its focus on non-core businesses like GaN power semiconductors and concentrate its capabilities on AI chip manufacturing and packaging."