Taipei: Taiwan Semiconductor Manufacturing Co. (TSMC) has announced plans to phase out its GaN semiconductor business over the next two years. Analysts attribute this decision to increasing competition from China, which has significantly impacted the profit margins of these products.

According to Focus Taiwan, TSMC, the world’s largest contract chipmaker, declared that this decision follows a comprehensive evaluation of its long-term development strategies and current market conditions. The move coincides with U.S.-based Navitas Semiconductor’s recent announcement of a strategic partnership with Powerchip Semiconductor Manufacturing Corp. (PSMC), through which it plans to transition its GaN orders from TSMC to PSMC within the next 12 to 24 months.

GaN (gallium nitride) compound semiconductors are part of the third generation of semiconductors, primarily used in 5G communications and electric vehicle production. Despite exiting the GaN market, TSMC is committed to working closely with its clients to ensure a smooth transition and fulfill their demands over the upcoming two years.

TSMC has stated that this gradual withdrawal from the GaN market is not expected to impact its sales guidance for the current year. The company remains optimistic about its growth, projecting a sales increase of 24-26 percent in 2025 in U.S. dollar terms, despite challenges posed by American tariff policies and a stronger Taiwan dollar.

Local news media reports indicate that TSMC initially utilized its six-inch fab and subsequently an eight-inch fab for its GaN product line. However, significant financial investment by China into this product line has led to a global decrease in product prices. Reports further reveal that TSMC Chairman C.C. Wei made the final decision last week, following a recommendation from Kevin Zhang, the company’s senior vice president for business development and global sales, and the company has since informed its clients of this strategic change.

Navitas has indicated that PSMC will begin manufacturing its GaN portfolio, with voltage ratings ranging from 100V to 650V, at a facility in Zhunan. Production is expected to commence with the 100V family in the first half of 2026.