TSMC's advanced production hums

Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電), the biggest maker of chips for other companies, said it's using more than four-fifths of production capacity that fetches the highest profit margins as global demand for chips rebounds.

The surge in orders is linked to sales of Microsoft Corp's Xbox video-game console, according to analysts. The number of chips made with TSMC's most-advanced technology using 0.18-micron and finer circuits increased since September, the company said.

"Utilization is between 82 percent and 88 percent at that level," TSMC spokesman Chuck Byers said.

"We're anticipating a slight uptick in the first quarter."

Orders for TSMC's most advanced capacity, which helps customers pare costs, rose in part because rivals such as United Microelectronics Corp (UMC, 聯電) lack the same ability, some investors said.

TSMC's wider variety of production technologies helped the company remain profitable unlike nearest rival UMC.

"Other companies can't produce at that level," said Magdalene Miller, who counts shares in TSMC and rival UMC among the US$2 billion she helps manage at Standard Life Investments.

Demand for semiconductors used in mobile phones showed a "slight" increase, Byers said. Chips used in consumer electronics and personal computers accounted for most of the increased demand, he said.

"The main customer is Nvidia Corp, which is making chips for Microsoft's Xbox," said Jonathan Ross, an analyst with Goldman Sachs Asia LLC. "TSMC's capacity at that level should be full by the first quarter next year."

TSMC has a wider range of customers in the PC, communications and consumer electronics businesses, Byers said. TSMC helps customers cut costs by reducing chip sizes and thereby increasing the number of semiconductors that can be cut from a silicon wafer. The production capacity at 0.18-micron and below level accounts for about a quarter of TSMC's sales, Byers said.