Taiwan's government-run free trade zone has recorded a significant surge in air cargo at Taoyuan International Airport, reflecting the island's expanding role in the global AI supply chain. Large volumes of high-value memory chips are imported into Taiwan for assembly and re-export as AI servers and semiconductor components, a production model that has remained robust for more than two years.

Benefiting from the continued expansion of AI applications, demand for chips used in high-performance computing (HPC), memory, networking, and smartphones has grown simultaneously, helping revive orders for semiconductor backend packaging and testing services. This has steadily lifted utilization rates among Taiwanese OSAT providers, raising the possibility that the first quarter of 2026 may defy the typical seasonal slowdown.

Memory design IC company Elite Semiconductor Microelectronics Technology (ESMT) reported a fourth-quarter 2025 profit of NT$1.033 billion (US$32.5 million), up 394.75% year-on-year and the highest quarterly level in four years, helping the company return to profitability for the full year. Chairman M.C. Chang said that this memory cycle is the most intense in the past 30 years. Contract prices in the first half of 2026 are expected to rise by at least multiples, and the benefits from price increases are still only in the early stages of the uptrend. Therefore, the top priority this year will be securing additional production capacity from partners.

At Embedded World 2026, most Taiwanese IC design houses reported unprecedentedly active engagement with European customers. Over the past year, visits by European downstream customers to Taiwan for supply chain discussions have far exceeded previous averages, driving a strong Taiwanese presence at this year's event.

DRAM and NAND flash prices have soared by as much as 180% since the Lunar New Year, amid worsening memory chip supply shortages that are expected to persist at least until late 2027. Industry analysts point to a fundamental shift in high-bandwidth memory (HBM) market competition — from market share to profitability — as conditions tighten.

Tesla CEO Elon Musk said the company's Terafab Project, aimed at producing artificial intelligence (AI) chips, will launch in five days, signaling an expansion beyond Tesla's core electric vehicle (EV) business into semiconductor manufacturing.

The chip market is facing a wave of price increases, with IDM companies issuing hike notices and foundries preparing to raise prices for the 8-inch wafer process amid current supply-demand dynamics. Many IC design houses see this as an opportunity to push customers to adopt the relatively advanced 12-inch process, highlighting its overall cost-effectiveness compared to 8-inch under today's cost environment.

Taiwan's leading automotive power and safety component supplier, Global PMX, has been accelerating its expansion into the fast-growing AI server market while simultaneously advancing into high-value semiconductor and smart medical products. Several new offerings have already entered mass production and shipment, and with additional overseas capacity set to come online, the company is positioning for stronger operational growth ahead.

Cheng Mei Materials Technology (CMMT), a Taiwan-based polarizer manufacturer, remains loss-making but has stepped up efforts to reposition itself as a semiconductor materials supplier. The company said its semiconductor packaging application films began shipping in the first quarter of 2026, while advanced packaging process materials are expected to contribute meaningfully in the future.

The US revoked a draft rule on March 13 that would have required the country's approval to export US-made AI chips anywhere in the world. The withdrawal marks a reversal of one of the Trump administration's most significant chip export strategies after ending a regulation inherited from the previous Biden administration last year.