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VIA and Intel cut orders to TSMC because of backlog

Intel and VIA Technologies cut semiconductor orders to the nation's largest made-to-order microchip manufacturer yesterday, citing a serious backlog of inventory throughout the supply chain.

Local media reported that weaker than expected fourth quarter demand for personal computers is finally taking its toll on Taiwanese manufacturers. High volumes of microchip inventory caused the two chip-makers to reduce fourth quarter orders to Taiwan Semiconductor Manufacturing (TSMC, 台積電).

TSMC officials, however, said the company has enough orders from other customers to keep foundries running at full capacity despite the decrease in orders.

TSMC also pointed out the decrease in orders would be a short term phenomenon -- lasting only until the inventory backlog worked its way out -- and that Intel expects orders to increase exponentially next year with the introduction of its new Pentium IV, 1.4 gigahertz microprocessor.

VIA officials cited a decline in sales between August and September as the main reason for decreasing its orders to TSMC. The company already has one or two months of inventory backed up in the supply stream.

The company could also be hurt by Intel's expectations of record fourth quarter sales of chipsets, VIA's major product. During a recent visit to Taiwan, Intel CEO Craig Barrett said his company's "chipset business last quarter had record volume in chipsets and we expect to beat that record this quarter."

The glut in VIA's inventory appears to put the company in a serious predicament, as increased production by Intel means companies will use Intel chipsets with their Intel microchips, instead of using VIA chipsets.
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