The turnover of contract chip manufacturers will fall this year

The turnover of contract chip manufacturers will fall this year for the first time since 2019

The demand for contract manufacturing services for semiconductor components is now not homogeneous in its structure due to the processes taking place on the market during the pandemic. The main negative impact on the market for such services, according to the representatives TrendForce, will have adverse macroeconomic factors throughout 2023. As a result, according to experts, the turnover of contract manufacturers will fall by 4% this year.

    Image source: GlobalFoundries

Image source: GlobalFoundries

The last time demand for contract manufacturing services was seen in 2019 was a 1.9% decline in monetary terms, the source explains. The market grew 24% in 2020, a further 26.1% in 2021, and last year capped that rally with a 28.1% increase in core company revenue.

Geopolitical realities are now complicating the work of semiconductor supply chains, and by the second half of the year the industry will already be feeling the effects of a trend to shift manufacturing out of China. In 2024, these phenomena will be even more noticeable.

In the current half of the year, the degree of utilization of the production lines will decrease, in the second quarter the minimum values ​​for some lithographic standards will be reached. The demand for some technical processes will only increase in the second half of the year. In this case, the mature lithography will suffer less from a reduction in the utilization rate of the production lines.

In the consumer sector, demand for components for smartphones and laptops will fall in the first quarter due to seasonal factors. The 200mm silicon wafer toll processing capacity will suffer from low utilization as a result, but will increase slightly in the second quarter, but this will not affect the general situation.

In the area of ​​300 mm silicon wafer processing using advanced lithography, low line utilization will be observed in the first half of the year. In the second half, utilization of TSMC’s 7 nm chip lines is expected to increase. At the same time, utilization of TSMC’s 5nm chip production lines will also return to optimal levels and may fall below 70% in this half of the year. From the middle of the year the production of 5 nm devices will start, which will appear as part of new devices. In Samsung’s case, usage of 8nm and thinner lines will remain low throughout 2023 as key customers such as Qualcomm and NVIDIA have shifted their orders to TSMC’s production line.

TSMC, UMC and GlobalFoundries, which manufacture chips based on sophisticated lithography on 300mm silicon wafers, will have utilization rates of 75 to 85% in the first half of the year. They will try to find new orders that will allow them to increase this number. Industrial electronics, electric vehicle components and medical devices may well be suitable areas for such expansion. Those companies whose orders are more focused on serving the consumer market will suffer the most from the line load reduction. In their case, the capacity utilization will not exceed 65-75%. In the field of mature lithography, the stress rate on 28nm production lines is higher than on 55nm and 40nm processes.

Supplier efforts to reduce dependence on China in the second half of the year will allow companies with manufacturing bases outside of China to benefit from a reallocation of orders. UMC and Vanguard may be among the beneficiaries of these processes, but the migration will be most noticeable in the segment of chips manufactured on 200mm silicon wafers. In the third quarter, the release of new products in the consumer area will begin, preparing for market entry in the second half of the year. This makes it possible to load lines for the production of custom chips with silicon wafers of both main sizes, but only under relatively favorable macroeconomic conditions.

Geographical diversification of production will lead to the emergence of more than 20 new semiconductor component manufacturing companies in the coming years. Five new companies will be established in Taiwan and the United States, six in China, four in Europe, and another four companies will be distributed between Japan, South Korea and Singapore. The success of all of these projects will depend heavily on the availability of financial support at the local government level.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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