March 16, 2006 – Demand for chips used in handsets and LCD displays has pushed top foundry Taiwan Semiconductor Manufacturing Co. (TSMC) to peak capacity for some of its older process lines, and set aside other lines to pick up the extra runs. The company is also diverting some orders to affiliate Vanguard Semiconductor International Corp., and pushing others orders into the third quarter, according to the Taiwan Economic News.

TSMC’s 0.18-micron capacity is operating at 104% capacity, forcing the foundry to set aside part of its 0.13-micron capacity for the products. TSMC officials are stumped about the impetus for the surge in demand, which spans sectors from microprocessors to handset chips and graphics chips.

“When flash memory chips are short in supply, people usually blame excessive demand for iPod for the shortage, but now we find no reasons for the strong demand,” said a TSMC executive quoted by the paper.

Orders for 2Q are expected to increase at least 10% from current levels, the report noted.