TAIPEI (Taiwan News) — Taiwan’s drive to secure its chip supply chains is creating unexpected winners, as small domestic manufacturers break into an industry long dominated by global giants, Nikkei Asia reported Wednesday.
In southern Taiwan, suppliers once tied to steel, plastics, and display panels are pivoting toward chipmaking as booming AI demand and geopolitical risks push chipmakers to localize sourcing. Executives say the strategy is intended to bolster resilience and cut carbon emissions.
Chipmakers like TSMC and UMC are expanding their local supplier bases to reduce reliance on overseas vendors. Beneficiaries include Advanced Echem Materials, Sunlit Chemical, IV Technologies, among others.
The shift has opened doors, but it has also raised the stakes for smaller companies unused to the punishing standards of advanced chipmaking. Qualification processes can take years and require heavy upfront investment, with little margin for error.
“For a small company, entering the chipmaking materials business is as risky as robbing a bank,” Advanced Echem Materials Chair Chan Wen-Hsiung (詹文雄) said. “You either succeed or you don’t survive.”
He said firms must expand capacity even before approval, knowing failure could mean collapse.
Advanced Echem once focused on the display sector but stagnation forced it to look elsewhere. When Chan pushed to develop cutting-edge semiconductor materials, most board members quit. They were convinced the firm could not compete with Japanese heavyweights such as Sumitomo or Fujifilm.
Open to experiment
The gamble paid off as TSMC sought more local suppliers for advanced nodes. After submitting samples for more than a year, several of Advanced Echem’s products were qualified for use in TSMC’s 2 nm production.
“I realized we had to focus on the most advanced processes,” Chan said, noting chipmakers are reluctant to change mature lines but more open to experimentation at the frontier. That openness has proven decisive for smaller entrants.
A similar path was taken by the G2C+ Alliance, led by C Sun and packaging-equipment maker Gallant Micro Machining. Both companies had struggled in mature industries such as printed circuit boards and displays before turning to chips.
“We worked on advanced packaging machines for nearly 10 years before a top customer adopted them,” said Liang Yu-wen (梁又文), Gallant Chair and C Sun General Manager. He said persistence transformed a once-criticized product line into the company’s main growth engine.
Semiconductor-related equipment made up just 4% of C Sun’s revenue in 2020 but surged to about 50% in 2025. Liang said retaining engineers required clear technology roadmaps rather than simply higher pay.
The push into chips has been reinforced by broader forces beyond Taiwan. Heightened US-China tensions, export controls, and lessons from the COVID-19 pandemic have made supply-chain security a priority for chipmakers, a trend also highlighted in recent Reuters reporting.
Traditional players
Capital markets have followed suit, with semiconductor firms dominating new listings in Taiwan. According to a Nikkei Asia analysis, chip-related companies accounted for nearly a quarter of new listings in 2025, while share prices of several local suppliers have surged on AI-driven demand.
Sunlit Chemical illustrates how traditional players can move up the value chain. Once a supplier to the steel industry, it spent years building logistics and traceability capabilities to meet the advanced chip production standards.
“If you want to supply the world’s top chipmakers, the entire value chain must meet the highest standards,” said Sunlit Executive Vice President Lily Tsai. She said in-house packaging, tanker fleets and batch-level traceability are now essential.
Even Praise Victor Industrial, best known for tennis rackets and insoles, has entered the chip industry by supplying CMP pads, a consumable long dominated by US-based DuPont. Its chip unit, IV Technologies, says customers are increasingly willing to test new suppliers.
Sunrise industry
“When we say we make polishing pads, people are surprised because there hasn’t been a second vendor for decades,” said IV Technologies General Manager Yang Wei-wen (楊偉文). He added that localization efforts are finally lowering barriers.
TSMC executives say strengthening the local ecosystem is a strategic priority. TSMC Senior Vice President Hou Yung-ching (侯永清) said the industry must cultivate stronger domestic suppliers and attract foreign investment, especially in materials.
TSMC’s latest sustainability report says it is expanding local procurement across equipment, materials and services, while helping suppliers upgrade technology and cut emissions. Some key suppliers have followed TSMC overseas, setting up operations in Arizona to support its US expansion, according to previous Nikkei Asia reports.
For smaller firms, the message is clear. “If you’re in a sunset industry, opportunities are limited,” Chan Wen-Hsiung said, adding that semiconductors still offer room to grow. “We do see more traditional chemical and material players are heading this way.”
