Contract chipmaker revenue growth to slow to 20% this year

Last year, the contract chip manufacturing services market showed revenue growth of 22%, but this year it will be limited to 20% growth, according to analysts at Counterpoint Research. High demand for AI components will allow TSMC to actively increase revenue, but gradually the situation with chip supplies will begin to improve outside this segment.

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The contract manufacturer equipment utilization rate will remain high this year (over 90%) in the advanced lithography segment, including 5nm and thinner processes, but will be significantly lower in the mature process sector (22/28nm) due to the impact of demand cyclicality. According to Counterpoint Research, the average annual revenue growth in the contract segment will be in the range of 13% to 15% from 2025 to 2028. In the long term, contract manufacturer revenue growth will be determined by demand for advanced lithography and modern chip packaging methods. At least these factors will come to the fore in the next three to five years.

This year, as experts note, demand for contract chip manufacturing services will recover in the consumer electronics, network equipment, and Internet of Things segments. According to SEMI forecasts, production capacity in the contract segment will increase by 10.9% in real terms this year, to 12.6 million silicon wafers per month. The memory chip production segment will grow by only 2.9% this year after last year’s growth of 3.5%.

Image source: Counterpoint Research

The production lines specializing in processing 200 mm silicon wafers will be less loaded this year than the 300 mm ones, since they are more closely associated with the production of chips for the automotive market and the industrial automation sector. The automotive segment itself will definitely not start to recover until the middle of this year, since warehouses are overstocked.

According to Counterpoint Research, TSMC’s technological leadership in the contract market is not under threat in the next few years. The company currently controls more than 60% of this market. It plans to increase capital expenditures this year from last year’s $30 billion to a range of $38 to $42 billion. TSMC’s revenue for the current year will grow by 26%, as the company’s management expects.