IC foundry Taiwan Semiconductor Manufacturing Company's (TSMC) capacity utilization of its 28nm processes has fallen to 70% due to a slowdown in orders for high-end mobile chips, according to industry sources.

　　TSMC's key mobile chip clients have cut back on wafer starts recently to prevent excess inventory, said the sources. Disappointing sales of high-end smartphones have prompted the chip firms to carefully monitor their inventory levels.

　　TSMC saw its utilization rate of 28nm processes drop below 80% earlier in the third quarter, the sources indicated. As the foundry managed to persuade its 28nm chip customers to maintain a certain level of orders, the process utilization rate was able to bounce back and approach 90% for the quarter, the sources said.

　　However, with demand for high-end smartphones staying weaker-than-expected, TSMC's 28nm chip customers have moved to decelerate their pace of orders recently. Consequently, TSMC's utilization rates for its 28nm processes have slipped rapidly over the past few weeks, the sources noted.

　　The cutback of orders from TSMC's key mobile chip clients will reflect on the foundry's output performance in the first quarter of 2014, the sources observed.

　　In response, TSMC indicated that production capacity for its 28nm processes is unable to run at full utilization due mainly to weaker-than-expected demand for high-end smartphones. Nonetheless, TSMC is confident that the company is capable of supporting customers which may release short lead-time orders when demand picks up.

　　TSMC chairman and CEO Morris Chang said during the company's most-recent investors meeting that the IC industry continues to be engaged in the process of inventory adjustment in the fourth quarter, but the supply chain DOI would to fall significantly and approach seasonal levels by quarter-end.

　　TSMC has forecast consolidated revenues for the fourth quarter of 2013 will be between NT$144 billion (US$4.9 billion) and NT$147 billion, down 9-11% sequentially.