Taiwan and China Wafer Foundry Revenues Set to Surge in 2026 as AI Demand and Price Hikes Take Hold
The wafer foundry market in Taiwan and China entered 2026 with far stronger momentum than a typical off-season would suggest. Instead of a seasonal slowdown, both regions saw revenue gains in the first quarter, supported by strong demand for AI chips, policy-driven semiconductor activity in China, and improving utilization across key manufacturing nodes.
In the first quarter of 2026, Taiwan’s wafer foundry revenue climbed 6% from the previous quarter to reach US$38.7 billion. China’s wafer foundry sector also posted growth, rising 1.7% quarter on quarter to US$4.1 billion. While the pace of growth differed between the two markets, the broader message was clear: semiconductor demand remained resilient despite what is usually a quieter period for chip production.
AI demand continues to power Taiwan’s foundry growth
Taiwan’s performance was largely driven by the rapid expansion of artificial intelligence applications. Demand for AI processors, accelerators, and related high-performance computing chips kept advanced manufacturing nodes running at high utilization levels.
TSMC remained a key beneficiary of this trend, as its leading-edge process technologies continued to attract strong orders from customers developing AI hardware, data center chips, and advanced computing platforms. As AI infrastructure investment continues worldwide, demand for advanced-node wafer capacity is expected to remain one of the most important growth engines for Taiwan’s semiconductor industry in 2026.
This strong demand helped offset weakness in some consumer electronics segments, where smartphones, PCs, and other devices have experienced uneven recovery. Foundries have also been able to benefit from customers shifting chip orders away from slower consumer categories toward higher-growth applications such as AI, automotive electronics, industrial chips, and cloud computing.
China’s foundry market benefits from policy support
China’s wafer foundry industry also performed better than expected in the first quarter. Although its sequential growth was more modest than Taiwan’s, government policy support played a major role in sustaining demand and encouraging local chip production.
China has continued to push for greater semiconductor self-sufficiency, driving domestic customers to rely more heavily on local foundries. This has supported capacity utilization and revenue stability across mature process nodes, especially for chips used in power management, display drivers, industrial systems, automotive applications, and consumer devices.
While China still trails Taiwan in the most advanced semiconductor manufacturing technologies, its foundry sector remains important in mature and specialty nodes. These areas continue to see steady demand, particularly as local supply chains prioritize domestic production.
Second-quarter revenue expected to jump more than 10%
The outlook for the second quarter of 2026 is even stronger. Wafer foundry revenues in both Taiwan and China are expected to rise by more than 10% quarter on quarter, supported by two major factors: order mix improvements and foundry service price increases.
Customers are increasingly reallocating chip orders from traditional consumer electronics toward stronger application areas. This shift is helping foundries improve production efficiency and revenue quality. At the same time, price hikes across wafer foundry services are expected to begin contributing more clearly to revenue growth in the second quarter.
The combination of stronger demand, higher pricing, and better utilization is likely to create a significant revenue boost for the industry on both sides of the Taiwan Strait.
Price increases strengthen the 2026 revenue outlook
Wafer foundry price increases are becoming an important factor in the 2026 semiconductor market. As demand rises and capacity tightens in certain process technologies, foundries are gaining more pricing power.
For advanced nodes, AI-related demand continues to absorb available capacity, supporting higher pricing for premium manufacturing services. For mature nodes, pricing conditions are also improving in selected areas as demand stabilizes and customers secure supply for automotive, industrial, and specialty chip applications.
These price adjustments are expected to help foundries improve margins while also lifting overall industry revenue. As a result, the combined annual revenue growth of Taiwan and China’s wafer foundry industries is projected to exceed 25% year on year in 2026.
Advanced nodes remain the key battleground
The competition in advanced semiconductor manufacturing will remain a central theme through 2026 and beyond. Taiwan continues to lead in cutting-edge process technology, especially in nodes used for AI, high-performance computing, and advanced mobile processors.
Advanced-node capacity is expected to remain tight as AI chip developers compete for production slots. This is likely to keep utilization rates high and support further investment in next-generation manufacturing technologies.
China, meanwhile, is expected to continue expanding capacity in mature and specialty nodes while working to improve its advanced-node capabilities. Although restrictions and technology gaps remain challenges, China’s foundry industry is likely to keep receiving strong domestic support as part of the country’s broader semiconductor strategy.
Capital spending remains focused on future demand
Major wafer foundries in Taiwan and China are expected to continue investing heavily in capacity expansion and technology upgrades. Capital expenditure plans for 2026 are likely to focus on advanced nodes, specialty processes, packaging-related capabilities, and capacity needed for long-term AI and automotive demand.
Taiwanese foundries are expected to prioritize leading-edge technologies and high-value customers, while Chinese foundries may focus more on mature-node expansion, domestic supply chain needs, and strategic self-reliance.
These investments will shape the competitive landscape of the global semiconductor industry over the next several years.
Consumer electronics recovery remains uneven
Although AI is driving strong growth, the broader IT product market remains mixed. Shipments of major consumer electronics products are not expected to deliver explosive growth in 2026. Smartphones, notebooks, desktops, and tablets may see only selective recovery, depending on replacement cycles and economic conditions.
However, foundries are becoming less dependent on traditional consumer electronics demand than in previous cycles. Growth from AI servers, automotive electronics, industrial automation, networking equipment, and edge computing is helping diversify revenue streams.
This shift is important because it makes the wafer foundry industry more resilient. Even if consumer electronics demand remains moderate, higher-value applications can continue to support revenue growth.
Full-year 2026 growth expected to exceed 25%
With a strong first quarter, a robust second-quarter outlook, and price increases taking effect, the wafer foundry industries in Taiwan and China are on track for a powerful year.
Combined full-year 2026 revenue growth for both markets is expected to surpass 25% compared with 2025. Taiwan is likely to remain the dominant revenue contributor, supported by advanced-node leadership and strong AI chip demand. China is expected to maintain steady growth through domestic semiconductor policies, mature-node demand, and continued efforts to strengthen local chip production.
The biggest themes for the year will be AI-driven advanced-node demand, foundry pricing power, utilization rate improvements, and capacity investment. Together, these factors are reshaping the wafer foundry market and positioning 2026 as one of the industry’s most important growth years.
The semiconductor off-season was unusually strong, and the coming quarters may be even stronger. As AI adoption accelerates and chipmakers adjust to changing demand patterns, Taiwan and China’s wafer foundry industries are expected to remain at the center of global semiconductor growth in 2026.
