As of 2023, Taiwan holds approximately 46% of global semiconductor foundry capacity, followed by China (26%), South Korea (12%), the US (6%), and Japan (2%), according to TrendForce. However, due to government incentives and subsidies promoting local production in countries such as China and the US, the semiconductor production capacities of Taiwan and South Korea are projected to decrease to 41% and 10%, respectively, by 2027.

By 2027, Taiwan’s dominance in the global chip foundry market is projected to dip to 41%, as China and the US ramp up.

In advanced manufacturing processes (including 16/14nm and more advanced technologies), Taiwan leads with a 68% global capacity share in 2023, followed by the US (12%), South Korea (11%), and China (8%). Meanwhile, Taiwan holds nearly 80% when it comes to EUV generation processes (such as 7nm and beyond).

In response to the concentration of semiconductor manufacturing capacity in Taiwan, the US, which has a high demand for advanced processes, is actively encouraging and supporting major companies such as TSMC, Samsung, and Intel. 2027, the US share of advanced process capacity is expected to increase to 17%, although TSMC and Samsung will still account for over half of this capacity.

Japan is also planning a return to semiconductor manufacturing, actively supporting local company Rapidus with a goal of reaching the most advanced 2 nm process. They aim to create a semiconductor cluster in Hokkaido and are offering subsidies to foreign companies, including Japan Advanced Semiconductor Manufacturing (JASM) and PSMC’s Sendai plant (JSMC).

China is focusing aggressively on mature process technologies (28nm and older), particularly in response to export controls on advanced equipment by the US, Japan, and the Netherlands. By 2027, China’s share in mature process capacity is expected to reach 39%, with room for further growth if equipment procurement proceeds smoothly.

However, as Chinese manufacturers rapidly expand their mature process capacities—backed by government subsidies—this could lead to intense price competition in products such as CIS, DDI, PMIC, and power discrete, impacting Taiwan-based foundries like UMC, PSMC, and Vanguard. Vanguard is expected to be most affected due to its product line including LDDI, SDDI, PMIC, and power discrete. Other companies such as UMC and PSMC will maintain their advantages in 28/22nm OLED DDI and memory sectors.

In response to chip shortages and geopolitical influences, fabless customers are diversifying risk by working with multiple foundries, potentially leading to increased IC costs and concerns over duplicate orders. Customers are also requiring global validation of production lines, even with long-term foundry partners, to enable flexible capacity adjustments. Consequently, foundries must navigate larger scale capacity and price competition while needing to maintain profitability, flexibility in capacity adjustments, new capacity depreciation pressures, and technological leadership.

Separately, SEMI, the global semiconductor association, forecasts that China, Taiwan and Korea will remain the top three destinations for semiconductor equipment spending through 2025.

China is projected to maintain the top position over the forecast period as the region’s equipment billings continue to soar. Equipment shipments to China are projected to surpass a record $30 billion in 2023, widening its lead with other regions. While equipment spending for most tracked regions is expected to fall in 2023 before resuming growth in 2024, China is expected to see a mild contraction in 2024 after heavy investments in 2023.