Showing how rapidly the semiconductor industry can pull back its foundry orders, TSMC, the world's No.1 foundry, is expected to forecast a 35 to 45 per cent drop in sales for the current quarter, and an increase of inventory from 90 days in Q408 to 100 days in Q109.
Graphics chip Nvidia has said it expects revenues down 30 to 40 per cent in the quarter and Xilinx is expecting 15 per cent to 25 per cent drop. Both are major customers of TSMC.
The pull-back in wafer demand comes not just from fables companies like Nvidia and Xilinx, but from IDMs pulling back out-sourced production to put on their own production lines.
It is thought that the No.s 2 and 3 foundry players, UMC and Chartered Semiconductor have been harder hit than TSMC with analysts suggesting they could be moving into loss.
Rumours reported by Reuters suggest that the holder of 60 per cent of Chartered's shares, the Singapore-based investment company Temasek, might seek to sell out its stake in Chartered. TSMC or UMC are seen as the most likely buyers.
Not so many months ago, there were stories that TSMC was going to jack up its prices as IDMs become more and more dependent on the foundries for manufacturing. While not admitting that was its intention, TSMC did acknowledge that it would seek to maintain pricing at each process node for a longer period than it had previously.
Now it looks as if the price of wafers is going to become very competitive.