Powerchip in talks with TSMC over supply crunch

Powerchip Semiconductor Corp (力晶半導體) said it discussed providing production capacity to Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's largest supplier of made-to-order chips, which has more orders than it can meet.

"TSMC has a huge shortage" of capacity, Frank Huang (黃崇仁), chairman of Hsinchu-based Powerchip, Taiwan's third-largest computer memory-chip maker, said in an interview. He did not elaborate on the size of the shortfall.

TSMC hasn't kept up with demand for image sensors -- chips used in digital cameras and mobile phones to capture photos -- TSMC spokesman Tzeng Jinnhaw (曾晉皓) said.

The company makes the chips in its older plants from eight-inch silicon wafers, he added. The company hasn't negotiated with Powerchip, Tzeng said.

Huang said his company will begin making image sensors as global demand for digital cameras by Japanese makers -- the dominant sellers -- surged 66 percent in the year to April, according to Tokyo-based Camera and Imaging Products Association.

In the same month, TSMC said its factory use in the present quarter will exceed 100 percent on demand for chips used in consumer-electronics products.

TSMC is making its best profit from image sensors, which use older technology that connects transistors on the chips with metal wires that are 0.25 micron in length, Huang said. The most advanced chips are made with gaps between transistors of less than half the space.

"Image sensors are increasingly used in digital cameras that can take photos with up to 3 megapixels because in that range they're cheaper than CCDs," said Alfred Ying (應宗傑), an analyst with BNP Paribas Peregrine in Taipei. CCDS, or charge-coupled devices, are older technology devices for capturing photographs.

TSMC probably referred customers such as OmniVision Technologies Inc of Sunnyvale, California, to Powerchip as an alternative supplier rather than discussing a capacity-sharing agreement, Ying said.

OmniVision is among TSMC's image sensor customers, Tzeng said. TSMC has used other chipmakers in the country such as Vanguard International Semiconductor Corp (世界先進) and Mosel Vitelic Inc (茂矽) to supply additional capacity, he said.