After earlier climbing to the highest level in 20 months, the main TAIEX share index ended down 27.19 points at 6,548.34, with active turnover of T$133.55 billion ($4.07 billion). The TAIEX rose 6.7 percent this year.
"It's inevitable to see a pullback after recent run-ups but if you take a look at the performance of LCD and some consumer-related shares, you won't worry too much about the market's future direction," said Chiang Chen-sheng, manager at MasterLink Investment Advisory.
Chiang said the index could regain momentum and go as high as 6,700 points next week.
The bellwether electronics sub-index fell 0.37 percent but makers of display screens and consumer gadgets defied the decline. Financials finished off 0.74 percent.
-- United Microelectronics Corp lost 1.59 percent. The Taiwan stock exchange and the Financial Supervisory Commission said they were reviewing stock sales by some United Microelectronics executives as a dispute over reporting requirements with the world's second-largest contract chip maker intensified.
Chairman Robert Tsao will quit his job and let Chief Executive Jackson Hu take over, the company said on Thursday.
Analysts saw Tsao's resignation as attempt by the company to bring the dispute to an end.
-- Chi Mei Optoelectronics Corp, Taiwan's second-largest maker of display panels, was the most actively traded issue by turnover, rising 3.85 percent.
Larger rival AU Optronics Corp shot up 1.24 percent as investors bet on rising demand for computers and LCD televisions next year.
-- Consumer plays also gained ground.
Catcher Technology Corp, which makes casings for laptop computers and mobile phones, jumped 2.51 percent and Cheng Uei Precision Industry Co Ltd, which supplies components for Microsoft Corp's Xbox game machines, added 3.4 percent.
But Mediatek Inc gave up earlier gains, inspired by a report that the firm would produce 60 million chipsets for mobile phones next year, doubling from this year. The issue fell 1.9 percent.