5 Reasons Why TSMC Is Exiting the GaN Market

TSMC plans to exit the GaN foundry business by 2027. What prompted that decision?

By Mark LaPedus

In an unexpected move, TSMC plans to exit the gallium nitride (GaN) foundry business by 2027.

The move impacts several of TSMC’s long-time GaN foundry customers, including Navitas, Rohm and STMicroelectronics. These and other companies had their respective GaN chips made by TSMC. Now, they will need to find new manufacturing partners that can produce GaN devices, which are used in power electronics, RF and other specialized applications.

Both Navitas and STMicroelectronics have already filled the void and found new manufacturing partners. Back in March, STMicroelectronics announced a GaN technology and manufacturing agreement with China's Innoscience. Then, in July, Navitas announced an agreement with Taiwanese foundry vendor Powerchip (PSMC). However, Rohm has yet to name a new GaN foundry partner.

Still, there is an unanswered question here. The GaN chip market is a fast-growing business. So why would TSMC exit the GaN foundry market?

GaN ecosystem

Before answering this question, let’s take a look at TSMC and the overall GaN market. Taiwan’s TSMC, the world’s largest foundry vendor, manufacturers chips for other companies in large facilities called fabs. The foundry giant is best known for making leading-edge chips for AMD, Apple, Broadcom, Intel, Nvidia, Qualcomm and others.

TSMC also produces chips based on trailing-edge and specialty processes, such as GaN. GaN, a III/V compound that combines gallium and nitrogen, is a wide bandgap semiconductor material. Basically, chips based on GaN materials can operate at higher voltages, frequencies and temperatures, compared to conventional silicon-based chips.

The GaN chip ecosystem consists of integrated device manufacturers (IDMs), fabless design houses and foundry vendors. IDMs are companies that design, make and sell their own GaN-based devices in the market. Fabless companies design and sell GaN-based devices, but these vendors don’t own a fab. Foundry vendors make chips for other companies.

Then, the GaN device market itself can be split into two sub-segments: power electronics and RF. In RF, GaN devices are used in 5G wireless equipment, defense electronics and other products.

Power electronics is a broad field, which deals with the control and conversion of electric power in systems. GaN-based power chips are used in various applications, such as automotive, fast chargers and power supplies.

The GaN device market is growing. But in a surprising move, TSMC will exit the GaN foundry sector. “After thorough evaluation, we have decided to gradually exit the gallium nitride business over the next two years,” according to officials from TSMC. “This decision is based on market dynamics and aligns with our long-term business strategy. We are working closely with our customers to ensure a smooth transition and remain committed to meeting their needs during this period. Our focus continues to be on delivering sustained value to our partners and the market. We do not expect this decision to impact our previously announced financial targets.”

For some time, though, there were signs that TSMC planned to exit the GaN market. “Industry analysts at TechInsights had already observed early signs of customer disengagement from TSMC’s GaN business as early as April, notably with STMicroelectronics' GaN supply and development agreement with Innoscience,” said Cédric Malaquin, an analyst with TechInsights, a market research firm, in a blog.

In 2020, STMicroelectronics formed a GaN foundry alliance with TSMC. However, in March 2025, STMicroelectronics announced a new GaN technology development and manufacturing deal with China’s Innoscience. Innoscience claims to be the world’s largest IDM focused on GaN. Innoscience manufactures its GaN devices in a 200mm fab in China.

Meanwhile, for years, TSMC has produced GaN-based chips for Navitas. Then, in July 2025, U.S.-based Navitas announced a new foundry partnership with Taiwan’s PSMC. Under the plan, PSMC will manufacture Navitas’ GaN IC portfolio in its 200mm fab in Taiwan.

PSMC is also expected to manufacture Navitas’ GaN portfolio with voltage ratings from 100V to 650V. The 100V family is expected to start production at PSMC in the first half of 2026. The 650V devices will transition from TSMC to Powerchip over the next 12 to 24 months.

Another company, ⁠Rohm, announced a GaN foundry alliance with TSMC in 2024. Japan’s Rohm has yet to name a new foundry partner.

Why did TSMC exit the GaN biz?

Still, the question is clear: Why does TSMC want to exit the GaN foundry business? In my assessment, here’s five possible reasons:

1-GaN foundry market is less attractive

For years, TSMC has manufactured GaN-based devices for several foundry customers. For TSMC, GaN isn’t a big business, but it provides a steady stream of sales with decent margins.

TSMC will continue to manufacture GaN devices for customers until 2027. But if TSMC should decide to stay in the GaN foundry segment, the company would need to invest in the technology. “While TSMC continues to manufacture GaN devices on its 6-inch lines, the industry is rapidly transitioning to 8-inch wafers, potentially diminishing the strategic value of TSMC’s GaN operations,” TechInsights’ Malaquin said.

TSMC can afford to migrate to a 200mm fab for GaN. But in some respects, the math doesn’t add up for the company to invest in 200mm GaN production.

Today, the GaN foundry segment is becoming overcrowded. Soon, there will be too many GaN foundry vendors chasing after a relatively small business. Many GaN foundries will soon compete on price. And the margins will likely plummet.

2-GaN is still a small market

The GaN device market is growing. In total, the power GaN device market is expected to grow from $260 million in 2023 to $2.01 billion by 2029, according to the Yole Group. Then, in total, the RF GaN device market is expected to grow from $1.1 billion in 2023 to $2 billion by 2029, according to Yole.

Those figures pale in comparison to TSMC’s largest markets. For example, TSMC’s largest market is high-performance computing (HPC), which involves the AI chip segment. Nvidia is TSMC’s biggest foundry customer here. In the first quarter of 2025, some 59% of TSMC’s sales—or a whopping $15 billion—were generated by the HPC market alone.

Plus, in the second half of 2025, TSMC is ramping up its new 2nm process. That process requires huge investments.

While TSMC will continue to serve the trailing-edge and specialty markets, the company needs to make some tough choices here. It can’t serve all markets. It also makes sense to focus on bigger markets like AI and 2nm technology.

3-The GaN device market is maturing

Years ago, GaN was an exotic technology. GaN-based power amps were mainly used for radar and handheld communications equipment for the military. Over time, GaN devices began to make inroads in the commercial markets.

In recent times, though, there are signs that the GaN device market is maturing. Over time, a growing number of companies have entered the GaN chip market. Plus, a number of new entrants from China have entered the GaN fray. Yet, the market isn’t big enough to support all vendors. As a result, the GaN device market is beginning to consolidate. The big suppliers are gobbling up the smaller players.

To be sure, the GaN device segment is still a decent market with plenty of opportunities. But a possible price war is looming on the horizon.

On top of that, a growing number of foundry vendors have entered the GaN market, particularly from China. There are too many GaN foundry vendors. At some point, GaN foundry vendors will just compete on price, which in turn could lead to a shakeout in the arena.

On the bright side, GaN is by far a better market than silicon carbide (SiC), another wide bandgap semiconductor material. Not long ago, SiC power devices were in huge demand. These devices are used in electric vehicles (EVs), power supplies, solar inverters and other products.

But with the exception of China and a few other nations, EV sales have been disappointing. Thus, the demand for SiC devices is weak. And today, the SiC device market is a terrible business.

4- The China factor

As stated, Innoscience as well as other China-based companies are competing in the GaN device market. In addition, several China-based foundries are accelerating their GaN efforts, including AMSfab, Sanan IC, and CR Microelectronic's Runxin Micro, according to TechInsights.

Here’s the worst-case scenario: China will likely compete on price and turn the entire GaN market upside down.

5-TSMC can hand off the business to VIS

TSMC plans to exit the GaN business. However, in the future, TSMC can simply hand off any potential GaN foundry business to Vanguard International Semiconductor (VIS), a Taiwan-based foundry vendor. TSMC is a large shareholder of VIS. It has a 27.55% stake in VIS.

VIS offers several types of foundry processes, including a 200mm GaN technology. TSMC can refer future GaN business to VIS. That made TSMC’s GaN decision easier to rationalize.