TSMC Exits GaN Foundry Business - Opportunity Analysis for Chinese Manufacturers Like Sanan Optoelectronics

Gallium Nitride (GaN), as a representative of third-generation semiconductor materials, is experiencing a period of rapid growth. According to industry research data, the global GaN power device market size is approximately $2 billion in 2024 and is expected to grow to over $10 billion by 2030, with a compound annual growth rate (CAGR) exceeding 25% [1]. This growth is mainly driven by the following application areas:

• Consumer Electronics Fast Charging
  : Sustained demand growth for mobile phone and laptop chargers
• Data Centers
  : Demand for improved power efficiency in server power supplies
• Electric Vehicles
  : On-board chargers (OBC) and DC-DC converters
• Communication Base Stations
  : 5G/6G RF power devices

Region	Key Players	Characteristics
Taiwan Region	TSMC, WIN Semiconductors, Macroblock	Leading technology, large production capacity
Mainland China	Sanan Optoelectronics, Hiwa Semiconductor, Simei Microelectronics	Rapidly catching up, domestic substitution
International IDMs	Infineon, GaN Systems, Navitas	Integrated design and manufacturing

---

If TSMC indeed exits the GaN foundry business, it may be based on the following strategic considerations:

1. Strategic Focus
   : TSMC is concentrating resources on advanced processes (3nm/2nm), and AI chip foundry business is growing strongly, requiring limited resources to be tilted towards high-value businesses [2].

2. Limited Scale Effect
   : The GaN power device foundry business is relatively small in scale, accounting for a limited proportion of TSMC’s total revenue, making it difficult to generate significant scale effects.

3. Gross Margin Pressure
   : The gross margin of the GaN foundry business may be lower than TSMC’s overall average, and profit pressure is increasing against the backdrop of intensified competition in mature process foundry.

4. Production Capacity Optimization
   : TSMC’s mature process capacity utilization fluctuates, requiring product portfolio optimization to enhance overall profitability.

As a mature process foundry in Taiwan Region, Powerchip will have the following advantages if it takes over TSMC’s GaN business:

• Production Capacity Foundation
  : Powerchip has 12-inch mature process capacity, which can be used for GaN foundry
• Technology Reserve
  : Rich experience in special processes
• Market Motivation
  : Seeking expansion in the high-growth power semiconductor field
• Geographical Advantage
  : Highly overlapping with TSMC’s customer base, facilitating business transfer

---

Sanan Optoelectronics (600703.SS), as a leading enterprise in China’s GaN field, has the following competitive advantages:

• IDM Model
  : Complete industrial chain layout from GaN epitaxial growth to chip manufacturing, packaging and testing
• Technology Accumulation
  : Batch production capacity of 6-inch GaN epitaxial wafers
• Capacity Expansion
  : The 8-inch GaN production line is under construction, which is expected to significantly increase production capacity

• Equipment and Material Costs
  : Using domestic equipment and materials, the cost is significantly lower than international manufacturers
• Labor Costs
  : Cost advantages compared to Taiwan Region and European/American manufacturers
• Scale Effect
  : The scale effect of LED chip business helps to share GaN R&D costs

• Industrial Support
  : Enjoy national policy support for third-generation semiconductor development
• Capital Support
  : Obtain support from capital markets such as large funds
• Localization Demand
  : Meet the domestic customers’ demand for supply chain autonomy

1. Order Taking Opportunities
   : The global GaN foundry capacity may have a gap, and Sanan Optoelectronics is expected to take over the transfer orders of international customers

2. Accelerated Domestic Substitution
   : Under the policy orientation of autonomy and controllability, domestic customers will accelerate the adoption of domestic GaN devices

3. Technology Catch-Up Window
   : Use the time window to accelerate technological R&D and narrow the gap with international leading enterprises

4. Market Share Expansion
   : Expand the share and influence in the global GaN foundry market

Company	Business Characteristics	Development Potential
Hiwa Semiconductor	Compound semiconductor foundry, GaAs/GaN	Focus on RF and power devices
Simei Microelectronics	MEMS and compound semiconductors	Strong process development capabilities
Jingfang Semiconductor	Advanced packaging	Leading packaging technology
China Resources Microelectronics	Power semiconductor IDM	Rich experience in power devices

---

• Process Gap
  : There is still a 1-2 generation gap between China’s GaN process technology and the international leading level
• Yield Challenge
  : Mass production yield needs to be continuously improved to have cost competitiveness
• Reliability Verification
  : Product reliability requires long-term verification to gain recognition from international customers

• Customer Certification Cycle
  : The certification cycle for international customers is long, usually taking 1-2 years
• Price Competition
  : Facing price pressure from Taiwan Region and international manufacturers
• Demand Fluctuations
  : Uncertainty in downstream application demand, especially in the consumer electronics field

• International Sanctions
  : Geopolitical risks in the semiconductor field may affect the acquisition of equipment and materials
• Technology Blockade
  : Advanced process equipment and materials may be subject to export controls
• Subsidy Changes
  : Adjustments in industrial policies may affect enterprise profitability

---

1. Capacity Expansion Progress
   : Track the construction progress of Sanan Optoelectronics’ 8-inch GaN production line
2. Customer Development Status
   : Pay attention to whether international major customer certifications are obtained
3. Technological Breakthroughs
   : Track the improvement of key process indicators (such as on-resistance, switching frequency)
4. Performance Contribution
   : Observe the changing trend of GaN business revenue proportion

• Risk of intensified industry competition
• Risk of slower-than-expected technological iteration
• Policy risk
• Market demand fluctuation risk
• Geopolitical risk

---

TSMC’s exit from the GaN foundry business will bring important development opportunities for Chinese manufacturers. If this trend indeed occurs, it will accelerate the reshaping of the global GaN foundry market landscape and provide opportunities for Chinese manufacturers like Sanan Optoelectronics to take over orders and expand market share.

However, Chinese manufacturers also face multiple challenges such as technological gaps, yield improvement, and customer certification. Investors are advised to continue monitoring the technological progress, customer development status, and capacity expansion progress of domestic GaN manufacturers, seize investment opportunities brought by domestic substitution, and pay attention to relevant risk factors.

: This report is based on public industry information analysis and does not constitute investment advice. Please consult a professional investment advisor for specific investment decisions.

---

[1] Yole Developpement - Power GaN Market Analysis 2024
[2] TSMC official announcements and investor relations materials
[3] Sanan Optoelectronics investor relations information
[4] TrendForce Compound Semiconductor Research Report