Eight-inch fab capacity remains tight, whereas there is an excess of 12-inch fab capacity, according to SC Chien, co-president for pure-play foundry United Microelectronics (UMC).

Foundries will continue to see their 8-inch fab capacity fall short of customer demand for the next several years, said Chien, adding that silicon wafer shortages will also likely persist at the same time.

Demand for advanced-node process manufacturing is still being driven mainly by handset chips including application processors and baseband chips, Chien indicated. Application-specific integrated circuits (ASIC) for artificial intelligence (AI) and the Internet of Things (IoT) are another area requiring advanced process nodes, Chien said.

Nevertheless, the costs of advanced node technologies have been rising, Chien noted. Transitioning to more-advanced process technology also has to go through more technical difficulties, Chien said.

Tight 8-inch foundry capacity, rising silicon wafer costs and more capex needed to transition to a more-advanced node technology will be among the challenges facing Taiwan's semiconductor industry, according to Chien.

International chip vendors' enhanced technology and production capacity capabilities through mergers and acquisitions will also be another challenge to the competitiveness of Taiwan's semiconductor industry, said Chien.