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Taiwan’s Legacy Chip Industry Faces Competition as China Expands Market Share

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Taiwan’s legacy chipmakers, once dominant in the production of mature node chips, are grappling with increased competition from Chinese foundries that are rapidly expanding their market share. The shift began in 2015 when Taiwan’s Powerchip Technology entered a deal with China’s Hefei city to establish a foundry, Nexchip. Initially hoping to access the promising Chinese market, Powerchip now faces Nexchip as a major competitor, leveraging Beijing’s support and steep price discounts. This rivalry is most prominent in the $56.3 billion market for 28-nanometer chips, which are commonly used in sectors like automotive and display panels.

Chinese foundries, including Nexchip, Hua Hong, and SMIC, have aggressively expanded production capacities and undercut Taiwanese prices, further intensifying competition. The increased Chinese capacity has prompted concerns in Taiwan’s chip industry, with Powerchip and other Taiwanese companies like UMC and Vanguard International now focused on more advanced or specialized chip technologies.

Taiwanese chipmakers are struggling to maintain their foothold in the mature node segment as Chinese firms benefit from substantial state backing and lower margins. According to TrendForce, in 2024, China is projected to control 34% of global legacy chip production, surpassing Taiwan’s 43% share by 2027. The situation is made worse by the U.S. trade tensions, with U.S. President Donald Trump proposing up to 100% tariffs on semiconductors produced outside the U.S., which could impact Taiwanese exports.

Chinese foundries have become more aggressive in their efforts to capture business from Taiwanese clients. Many Chinese customers, particularly in consumer sectors like display panels, are increasingly opting to use Chinese fabs, following Beijing’s push for domestic supply chain localization. Taiwanese chip designers have acknowledged that they must adapt to survive, with some already shifting focus to more advanced technologies like 3D stacking, which combines logic and DRAM chips to enhance performance.

Despite the growing Chinese competition, some relief may come from the U.S. efforts to restrict China’s chip industry, particularly in light of rising geopolitical tensions. Taiwanese chipmakers are beginning to receive orders from international clients asking for chips to be made outside of China, a shift away from previous reliance on Chinese foundries.

MediaTek Prepares for Potential US Tariffs Amid Uncertainty

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MediaTek, Taiwan’s leading chip design firm, has been running simulations in anticipation of potential U.S. tariffs on Taiwanese goods, according to CEO Rick Tsai. Despite the uncertainty surrounding this issue, Tsai expressed confidence that the impact would be “manageable” in 2025.

Taiwan’s tech industry, including giants like TSMC, faces the risk of tariffs as U.S. President Donald Trump has proposed such measures to incentivize semiconductor production within the United States. On the campaign trail, Trump criticized Taiwan for allegedly taking U.S. semiconductor business.

Trump has outlined plans to impose tariffs on imported chips, as well as other products such as pharmaceuticals and steel, though no specific timeline has been set. When asked about the potential effects on MediaTek, Tsai referred to the situation as “very unpredictable,” but assured that the company is taking proactive measures, such as simulations, to prepare for the possible changes.

Although Tsai acknowledged the unpredictability of the situation, he believes the impact of any tariffs in the short term will be manageable, especially for 2025. “There are so many variables, so it’s very difficult to give an accurate estimate now,” he said.

In addition to trade concerns, MediaTek is facing pressure from the rise of DeepSeek, a Chinese AI startup whose lower-cost models are posing a challenge to Western tech investments in chipmakers and data centers. Despite this, Tsai remains optimistic about the AI market, noting that the spread of AI will benefit average users.

MediaTek’s shares have outperformed the broader market in 2025, showing a 7.8% gain so far, while the overall market has gained only 1.9%. However, the company’s shares closed flat on Friday.

Taiwanese Microsatellite Demonstrates High-Resolution Imaging Capabilities, Says Japan’s ArkEdge

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Japanese space startup ArkEdge Space announced on Friday that a microsatellite it helped build for Taiwan’s space agency has produced high-quality Earth images that may be the best ever captured by a satellite smaller than a suitcase.

The small optical observation satellite, ONGLAISAT, achieved a 2.5-meter resolution from orbit approximately 400 kilometers above Earth after its December launch. “The pictures are as clear as aerial photography (despite) being taken by a satellite of this size,” said Takayoshi Fukuyo, CEO of ArkEdge, during a media briefing earlier this week. He noted that it was likely the highest-resolution imagery ever recorded by a small “cubesat.”

ArkEdge released black-and-white images captured by ONGLAISAT late last month, showcasing detailed views of locations such as a Seattle suburb and Argentina’s Patagonia region.

ONGLAISAT—short for “onboard globe-looking and imaging satellite”—is equipped with optical imaging technology from the Taiwan Space Agency (TASA) and co-developed by ArkEdge and a University of Tokyo aerospace lab. Its mission is expected to conclude in early March, though TASA stated the demonstrated optical technology will be applied to future remote sensing missions.

Taiwan is accelerating its space infrastructure efforts amid rising tensions with China. These initiatives include the launch of a domestically produced weather satellite in 2023 and ongoing discussions with Amazon to adopt its satellite internet service, Kuiper.

Taiwan’s space expansion has also deepened its collaboration with Japanese commercial space companies. TASA announced partnerships with Japanese startups such as Space One and ispace, a moon exploration company. Additionally, Taiwanese private company TiSpace, founded by a former TASA official, plans to test its rocket at a private launch pad in northern Japan this year.