As Taiwan Semiconductor Manufacturing (TSMC) shifts its focus toward advanced process technologies, the company is advising clients to transfer some mature-node orders to its subsidiary Vanguard International Semiconductor (VIS). TSMC is facilitating this transition by licensing technology and selling 12-inch mature-node equipment to VIS, enabling the latter to handle lower-margin legacy orders.

The world’s leading foundry is doubling down on advanced nodes and advanced packaging. Industry sources indicate that TSMC will gradually outsource some 40nm–90nm orders to VIS. The company has already announced the shutdown of its Hsinchu-based 6-inch Fab 2 and plans to exit gallium nitride (GaN) foundry services within two years. Additionally, TSMC has sold some equipment to VIS and NXP Semiconductors’ Singapore-based joint venture, VSMC, signaling a clear strategic pivot toward higher-margin businesses.

"TSMC will strive to deliver the value we are capable of, and our long-term gross margin target of 53% remains unchanged," said CEO C.C. Wei, echoing recent reports of price hikes for TSMC’s advanced nodes. The company aims to offset the gross margin dilution from overseas expansions while streamlining operations to prioritize high-margin segments like advanced nodes and packaging.

Industry insiders confirm that TSMC’s gradual transfer of mature-node business to VIS is now a settled strategy. This year, TSMC halted operations at its 6-inch Fab 2 and initiated its exit from GaN foundry services, while also selling equipment to VIS.

Jake Lai, senior analyst at Counterpoint Research, noted that TSMC’s recent moves reflect a deliberate shift away from low-margin nodes to focus on high-value processes. With AI demand surging, TSMC is concentrating on expanding capacity for 3nm and more advanced nodes, as well as advanced packaging. The company is reallocating resources to accelerate this transition, optimizing operational efficiency and profitability.

TSMC acknowledges that overseas fabs will dilute gross margins by 2–3 percentage points annually in the next five years, potentially widening to 3–4 points in later years. Despite posting a strong Q3 2025 gross margin of 59.5%, surpassing industry expectations, the company anticipates continued pressure from overseas expansions, compelling it to shed low-margin businesses.

Revenue breakdowns reveal TSMC’s strategic shift: advanced nodes (7nm and below) accounted for 65% of revenue in Q1 2024 but rose to 73% by Q1 2025, with further marginal growth to 74% in subsequent quarters.

Lai predicts that TSMC may eventually exit its 6-inch Fab 2 due to insufficient economies of scale and sub-60% utilization rates post-2027. Similarly, 8-inch production lines could face consolidation if utilization fails to exceed 80%. Meanwhile, VIS stands to gain more outsourcing opportunities.

Collectively, these measures underscore TSMC’s efforts to streamline operations, fortify high-margin segments, and sustain competitiveness.

**TSMC Raises Prices for Advanced Nodes** TSMC is accelerating capacity expansion for its cutting-edge nodes while adjusting pricing to offset rising production costs and meet relentless global demand for advanced chips. Industry analysts expect TSMC to hike prices for sub-5nm nodes by 3%–4% starting January 2026, with some reports suggesting premium nodes could see increases up to 10%.

TrendForce sources indicate TSMC notified key clients in September 2025. The 2nm node is projected to undergo annual price hikes for four consecutive years, potentially leading to double-digit cumulative increases by 2030—impacting costs for AI, HPC, and other high-performance applications.

Soaring demand for AI accelerators and persistent shortages of high-end GPUs have driven these adjustments. TSMC is ramping up production of its N2P process for Apple and other major clients. Initially, price hikes were expected to apply only to U.S.-made chips, but reports now suggest a broader impact across TSMC’s Taiwan operations.

The reallocation of resources toward sub-5nm nodes may create bottlenecks for mature 6nm/7nm processes, affecting clients with less cutting-edge designs. If forecasts hold, global chipmakers—including Nvidia and Qualcomm—could pass rising costs to consumers, inflating prices for end products.

*Source: Semiconductor Industry News, originally titled "TSMC to Exit Mature Process Technologies."*