August 27, 2007 – TSMC says it will purchase up to about $168 million worth of shares in Vanguard International Semiconductor, in a bid to increase its stake from its current 26.8% stake up to about nearly 38%. The deal is part of TSMC’s strategy for boosting its 200mm capacity, and TSMC spokesperson/CFO Lora Ho noted that the foundry “has no intention to merge” with Vanguard.

The Taiwan foundry giant’s plans may also be designed to preemptively capture share before competitors do. Digitimes cited a Goldman Sachs analysis noting that the Taiwan National Development Fund has said it would sell its own 11% stake in Vanguard sometime this year, and TSMC likely wants to prevent that ownership going to someone else.

Local reports recently indicated Vanguard’s capacity utilization has spiked to 106% thanks mainly to trailing-edge (0.18-micron) business from TSMC, and a flurry of foundry orders for LCD driver ICs to replenish LCD makers’ inventories, and the company is mulling the possibility of borrowing more 200mm capacity even as it prepares to ramp a newly-purchased 200mm fab from Winbond to 20-25k WPM by the start of 2008.

TSMC board members recently approved a $22.8M spending plan to upgrade 200mm output using 0.18-micron logic processes to be capable of high-voltage radio frequency (RF) and BiCMOS processes, though actual monthly capacity will be reduced by about 12% to 11,100 200mm wafers/month.

The foundry also approved a $59.8 million capital appropriation to establish 300mm wafer-level packaging technology and capacity, reportedly in preparation for work on AMD’s Fusion microprocessor which has integrated graphics capabilities, and for which multichip packaging and wafer-level packaging methods would reduce production costs and manufacturing risks.