Expansion projects are projected to bring a further steep growth rate over the coming five years.

The ascendancy of Taiwan’s semiconductor sector to the top ranks of the worldwide chip industry has opened mounting opportunities for chemical manufacturing operations in this market.

According to a Horizon Databook report from California-based market research and consulting firm Grand View Research, revenue from the semiconductor chemical sector in Taiwan in 2024 came to approximately US$3.74 billion. Although that figure represents slightly less than 5% of the total chemical market (broadly defined as extending to such subsectors as pharmaceuticals and fertilizers), semiconductor materials are by far the fastest-growing category.

Grand View projects that the segment will enjoy a steep 13% compound annual growth rate (CAGR) between 2025 and 2030. The report also finds that in terms of revenue, Taiwan accounted for 23.9% of the global semiconductor chemicals market in 2024 and is expected to lead the global market in 2030 with US$7.69 billion in revenue.

Significantly contributing to that growth will be output from the vast greenfield project being undertaken in stages by Germany’s Merck Group on a 15-hectare site in Kaohsiung, seven times larger than the company’s original facilities in the southern city. The project, known as Jade Park after Taiwan’s highest peak, involves investment of more than half a billion U.S. dollars and will support production in all three of the main chemical material categories critical to the chip-making process: thin film, industrial gases, and special formulations. Phase 1, covering about half of the site, is due to be completed by the end of this year. Merck is widely known for its expertise in the field of liquid crystal.

The increasing domestic supply will help accommodate the rapid expansion underway at Taiwan’s semiconductor companies, notably the giant Taiwan Semiconductor Manufacturing Co. (TSMC), in large part to meet the soaring demand for AI-related chips. Procurement from domestic producers is even expected to be needed to support TSMC’s ambitious long-term projects overseas – primarily its US$165-billion commitment to build fabs in the United States, but also its plans in Japan and Germany.

“Especially at the beginning stage, the chemicals will probably come from Taiwan because for semiconductors the most important thing is the amount of yield you can get per wafer, and so you’ll want to minimize the variable factors,” explains an industry insider. That will mean relying chiefly on proven suppliers, he says.

Merck Taiwan Managing Director John Lee notes that chemicals are needed in virtually every one of the more than a thousand steps involved in producing an advanced semiconductor. The primary processes requiring chemicals are:

• The application of photoresists, light-sensitive polymers necessary for the photolithography process that creates patterns on silicon wafers.
• The etching of more precise patterns on the wafers to define the circuits for semiconductor devices.
• Doping, the creation of conductive or semi-conductive properties in the normally nonconductive silicon crystals.
• The deposition of thin-film materials onto the wafer to create needed special characteristics. (A similar process is used in the display industry, in which Taiwan ranks as the world’s second-largest producer.)
• Chemical mechanical polishing/planarization (CMP) processes, which are completed multiple times at each layer of the wafer to remove excess materials and create a thoroughly smooth surface.
• The use of cleaning agents to ensure the maintenance of utmost purity at all stages in the production process.

Industry evolution

Traditionally, the backbone of Taiwan’s chemical sector has been petrochemicals. In the 1970s at the take-off stage of the Taiwanese economy, development of the petrochemical industry – to provide the raw materials for the manufacture of all kinds of plastics products and synthetic fibers – was one of the cornerstones of the government’s economic planning. Construction of a large petrochemical complex in the Kao-hsiung area in that era was one of the Ten Major Infrastructure Projects that helped propel Taiwan to a new level of industrial development.

Petrochemicals – from the feedstock output of the naphtha crackers operated by the state-owned CPC Corp. and the private Formosa Plastics Group to a host of downstream producers – still account for the majority of chemical production in Taiwan. But in recent decades, growth in that segment of the industry has been held back by increased environmental protection constraints in Taiwan and the emergence of stiff competition from China. No new naphtha crackers have been built in Taiwan for decades.

Looking back on his 30-year career, John Lin, head of the Chemicals and Catalysts unit at BASF Taiwan, another German-invested company, reflects on how the Taiwan chemical industry has gone through multiple stages of development, always showing resilience in meeting the latest market requirements. The electronic chemical category is now the most dynamic portion of the Taiwanese chemical industry, Lin notes. Besides supporting the competitiveness of the semiconductor and other electronics companies that have become the pillar of the Taiwan economy, these chemicals bring the benefits of higher production value and lower environmental impact.

As part of its broad product portfolio, BASF, which boasts the status of being the world’s largest chemical company, produces a variety of process chemicals and customized formulated solutions for the semiconductor and display industries at its facility in Guanyin in Taoyuan, a plant that it acquired from Merck in 2014.

The presence on the island of world-dominant TSMC, along with such other key players as Taiwan’s United Microelectronics Corp., plus the U.S.-invested Micron Technology in the memory chip business, has been a key advantage for the chemical suppliers. Given the crucial importance of the semiconductor industry to Taiwan in terms of both the economy and national security, companies associated with the sector say they can often count on receiving preferential treatment from the authorities for such matters as energy supply, investment incentives, and land acquisition for expansion.

For the semiconductor fabs, the need for a tight working relationship with suppliers, especially when dealing with advanced technology chips, adds to the benefit of being in close proximity to one another in the same ecosystem. That collaboration has become increasingly crucial in overcoming the technological challenges as semiconductor manufacturing steadily progresses to ever smaller and more complex and powerful chips. In the latest generations, that means engaging in processing at the sub-atomic level. For thin-film deposition, for example, it requires rigorous and exhaustive teamwork among technicians and researchers from the chemical companies, the semiconductor fabs, and the tool vendors (companies such as Applied Materials, ASML, Lam Research, and Tokyo Electron) that make the highly specialized equipment for applying the thin film in minute and precise quantities.

Besides Merck and BASF, other AmCham Taiwan member companies have been active in expanding the role of electronic chemicals within their overall product mix. Among them, the LCY Chemical Corp., a Taiwan-based multinational acquired in 2019 by private equity firm KKR, in recent years has been placing increased emphasis on materials for the semiconductor and display industries. The company stresses its role as one of the few global suppliers of electronic-grade isopropyl alcohol (EIPA), an ultra-pure cleaning agent used in high-end chip manufacturing. As noted on its website, LCY is also equipped to “support electronic material customization for specific customer requirements.”

DuPont Taiwan’s diverse portfolio includes an array of chemicals for the semiconductor industry, including photoresists and photoresist removers, specialty removal and cleaning chemicals, and CMP materials. It is also a leading supplier of chemicals for display and printed circuit board production.

A leading supplier of polishing pads and slurries for CMP processing, DuPont operates a CMP Manufacturing & Technology Center in the Zhunan Science Park in Miaoli, a satellite of the Hsinchu Science Park, for convenient collaboration with its semiconductor customers. “CMP pads from DuPont have served as the industry standard for many years, and DuPont has a leading position at advanced technology nodes,” thanks in part to R&D conducted at the Zhunan facility, the company states.

“The growth of Taiwan’s semiconductor and AI sectors, which require specialized materials with shorter lifecycles yet higher values, has driven transformation toward tailored specialty applications,” says DuPont Taiwan President Dennis Chen. He notes that the company develops “CMP materials to meet the unique requirements for each CMP application and technology node.”

Citing Taiwan’s prowess in the global semiconductor industry, Merck’s Lee alludes to Taiwan’s ranking as number one worldwide in the foundry and packaging & testing sectors, second in IC design, and within the top four in memory chips. With the backing of an increasingly robust domestic chemical supply support system, he says he sees even greater prosperity ahead for the industry.