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

The last time a drop in demand for contract manufacturing services by 1.9% in USD was observed in 2019, the source explains. In 2020, the market grew by 24%, in 2021 by another 26.1%, and last year crowned this rally with a 28.1% increase in revenue from major companies.

Geopolitical realities are now complicating the work of semiconductor supply chains, and from the second half of the year, the industry will already feel the impact of a trend to shift production outside of China. In 2024, these factors will be even more noticeable.

In the current half of the year, the fab utilization rate will decrease, in the second quarter it will reach the minimum values for some nodes. Only in the second half of the year will demand grow for some technical processes. In this case, less advanced nodes will be affected the least.

In the consumer sector, demand for components for smartphones and laptops will decrease in the first quarter due to seasonal factors. The 200 mm silicon wafer contract processing capacity will suffer from low utilization because of this, but it will increase slightly in the second quarter, although this will not affect the situation in general.

For 300 mm silicon wafer processing using advanced lithography, low fab utilization will be observed throughout the first half of the year. In the second half, the utilization rate of TSMC's 7nm chip lines should increase. At the same time, the utilization rate of TSMC's 5nm chip production lines will also return to the optimal level, and in this half of the year it may drop below 70%. From the middle of the year, the production of 5nm components will begin, which will appear as part of new devices. In the case of Samsung, the utilization of 8nm and smaller nodes will remain low throughout 2023 as key customers such as Qualcomm and NVIDIA have shifted their orders to rival TSMC's production line.

TSMC, UMC and GlobalFoundries, which produce chips based on mature lithography on 300 mm silicon wafers, will demonstrate utilization rates from 75 to 85% in the first half of the year. They will try to find new orders that will allow them to raise this figure. Industrial electronics, components for electric vehicles 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 reduction in line load. In their case, the level of capacity utilization will not exceed 65–75%. In the field of mature lithography, the loading rate on 28nm production lines is higher than in the case of 55nm and 40nm processes.

Suppliers' drive to reduce dependence on China in the second half of the year will allow companies with manufacturing facilities 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 200 mm silicon wafers. In the third quarter, the release of new products in the consumer sector will begin, which are preparing to enter the market in the second half of the year. This will make it possible to load lines for the contract production of chips using silicon wafers of both main sizes, but only if there are relatively favorable macroeconomic conditions.

Geographic diversification of production will lead to the emergence in the coming years of more than 20 new enterprises for the production of semiconductor components. Five new enterprises will appear in Taiwan and the United States, six in China, four in Europe, and four more enterprises will be distributed between Japan, South Korea and Singapore. The success of all these projects will depend heavily on the availability of financial support at the state level in the field.