TAIPEI (Taiwan News) — TSMC and other leading chipmakers and packers are putting the brakes on expanding Japan and Malaysia due to lackluster demand for legacy chips, Nikkei Asia reported Friday.
Sources said the world’s largest contract chipmaker has now determined it will not need equipment for 16 and 12 nm chip production at its first Japanese chip plant in Kumamoto until next year. They added that chip suppliers have shifted their investment strategies to a “wait and see” mode.
Older chips, also called “legacy” or “mature chips,” are usually defined as 28 nm or larger. However, they are still used in applications including cars, toys, and everyday appliances.
“The demand for consumer electronics and automotive and industrial applications is not very good, and the recovery does not yet look promising,” one chip executive said. “Thus, it’s not urgent to massively expand at this point. The current utilization rate at TSMC's Kumamoto plant is much lower than expected.”
Despite being considered one of TSMC’s most successful overseas expansions, the Kumamoto plant’s current utilization rate is lower than expected, the report said. The fab focused on 28 and 22 nm chips for key clients such as Sony, Denso, and Renesas. However, given the downturn in demand, TSMC has shifted its priorities toward cutting-edge production in Taiwan and the US.
Meanwhile, Taichung-based Siliconware Precision Industries (SPIL), a key supplier for Nvidia, has informed partners that it is pausing expansion in Penang, Malaysia. The company will instead focus on constructing advanced packaging facilities in Yunlin, Taiwan, where demand for AI chips remains strong.
SPIL’s peer, ASE, also controlled by parent company ASE Technology Holding, has taken a similar approach. It recently opened new plants in Penang but has delayed increasing capacity due to lower-than-expected demand from clients in the automotive and industrial sectors. The company is focusing on expanding AI chip production in Kaohsiung.
China’s increasing output of mature chips has also contributed to the slowdown in Japan and Malaysia. As Beijing ramps up domestic semiconductor production, global chipmakers face greater competition and pricing pressures.
The weak electronics market is impacting other chipmakers as well. Renesas, one of Japan’s leading semiconductor companies, has announced workforce reductions and delayed opening a new plant due to slow demand recovery.
The slowdown has also affected chip substrate suppliers. AT&S, a major Intel supplier, has put its second Malaysian facility on hold, prioritizing advanced product development at its first site. Kinsus Interconnect Technology, which supplies Nvidia and AMD, has similarly halted plans for a new factory in Penang due to geopolitical risks and weak demand.
Uncertainty over US tariffs is another major concern. An industry executive in Penang noted that the prospect of new trade barriers under a possible second Trump administration has led many chipmakers to adopt a cautious investment strategy.
Despite the slowdown in semiconductor manufacturing, Malaysia’s data center sector remains strong. Industry executives say that companies like AWS and AliCloud continue to expand, driving demand for server assembly and infrastructure.
“Server supply chains, including assembly production by Supermicro and Wiwynn in Johor, are still feverishly expanding in Malaysia,” a source who has been in Penang for more than five years, told Nikkei Asia. Another chip source said his company is building two new plants in the Southeast Asian country to support data center demand.
