Leading foundry TSMC is accelerating its capacity restructuring and fully phasing out of the mature process domain. According to sources, TSMC currently maintains an annual 8-inch capacity of approximately 5 million wafers, of which about 80% (4 million wafers) will be progressively transferred to its affiliate company Vanguard International Semiconductor (VIS) over the coming years through order migration, equipment transfer, and technological collaboration. Industry expectations indicate that VIS's 8-inch capacity will subsequently double, establishing it as a core supplier in the global 8-inch foundry market.

This strategic adjustment stems from TSMC's resource reallocation amid the explosive demand for AI chips and high-performance computing in recent years. Its advanced processes below 3 nanometers and advanced packaging capacities such as CoWoS and SoIC have remained in severe supply shortage, with order backlogs extending to 2028. Under the multiple pressures of labor shortages, rising fab construction costs, and extended project timelines, available fab space and human resources have become critically scarce assets, compelling TSMC to initiate structural optimization of its 6-inch and 8-inch mature processes and redirect resources toward high-margin, high-growth AI-related businesses.

TSMC's Capacity Transfer Pathways

TSMC's capacity transfer represents not simple order outsourcing but systematic business restructuring.

In terms of equipment transfer, TSMC has sold 8-inch production equipment to VIS on two occasions in recent years, laying the hardware foundation for capacity assumption. Through these equipment purchases, VIS has rapidly expanded its production scale while inheriting TSMC's mature process technology heritage.

Regarding technology licensing, TSMC has confirmed the authorization of Gallium Nitride (GaN) technology to VIS, enabling it to become one of the few global foundries possessing both GaN-on-Si and GaN-on-QST process platforms. This technology transfer equips VIS with comprehensive solution capabilities in the power semiconductor domain, aligning with the strong demand for high-efficiency power management chips in the AI era.

Process node coverage includes mature process nodes from 40 nanometers to 90 nanometers, primarily encompassing product lines such as Power Management ICs (PMIC), Display Driver ICs (DDI), and Microcontroller Units (MCU). Although these chips do not utilize advanced processes, they maintain stable demand in automotive electronics, industrial control, and consumer electronics sectors—core strength areas for VIS.

VIS's Assumption Capacity and Strategic Layout

As an affiliate company in which TSMC holds approximately 38% equity, VIS has long focused on 8-inch specialty process foundry services, operating five 8-inch wafer fabs across Taiwan and Singapore, with an average monthly capacity of approximately 286,000 wafers in 2025. Leveraging deep accumulation in BCD, high-voltage CMOS, and analog mixed-signal technologies, VIS has established itself as an important supplier of power management and display driver chips.

Following capacity assumption, VIS will not only gain access to TSMC's substantial customer resource transfers but also capitalize on market opportunities driven by surging demand for AI power components. Currently operating at full capacity, VIS has selectively raised prices in the first quarter of 2025 and has notified customers of a second comprehensive foundry price increase effective April, with increases ranging from 10% to 15%, demonstrating its enhanced bargaining power in the mature process domain.

Furthermore, VSMC, a joint venture between VIS and NXP in Singapore, is constructing a 12-inch wafer fab utilizing TSMC-authorized process technology, with production expected to commence in 2027. This arrangement enables VIS to advance toward 12-inch advanced mature processes while expanding 8-inch capacity, forming a dual-track development strategy of "deepening specialty processes on 8-inch while expanding high-end applications on 12-inch."

Evolution of the Global Mature Process Landscape

TSMC's capacity adjustment is not an isolated case but rather a microcosm of structural transformation in the global semiconductor industry. Samsung Electronics has planned to close its S7 8-inch wafer fab in Giheung in the second half of this year, phasing out outdated low-margin processes to concentrate resources on 12-inch advanced nodes.

These collective actions have led to a contraction in global 8-inch capacity supply. Against the backdrop of surging demand for AI server power management chips, this has triggered a "fab closure-induced price increase" wave. In addition to VIS, professional foundries including SMIC and Huahong Group in mainland China, as well as DB Hitek in South Korea, have also benefited from capacity transfers. The global 8-inch foundry market is transitioning from a "major-fab-dominated" model toward a "specialized division of labor" paradigm.

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