You seem to be going fab-lite, would you like some help with that?

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Morris Chang, chairman and CEO of TSMC, reckons more than 20 fabs will close this year. And more could easily follow as older fabs become uncompetitive against newer, particularly 200mm lines.

Chang plans to help the process along by essentially doing the foundry equivalent of a carve-out on chipmaking operations run by integrated device manufacturers (IDMs).

"We plan to take full advantage of this opportunity and we are participating in active discussions with some of the IDMs in helping them to close their fabs and transfer the fab business to us," Chang claimed in a conference call with analysts today.

Rather than take the fabs themselves over from integrated device manufacturers (IDMs) - which would probably be uneconomic - his plan is to transfer the custom bits of the processes to TSMC where they can be added as modules to its existing lines. In this way, the former foundry owner gets to keep having parts made for it without the capital expenditure needed to keep an entire fab opened.

"We are committing considerable resources to our R&D to support the development of the relevant technologies that will be needed by those IDM customers that are planning to close their fabs," Chang explained.

The plan is not going to make TSMC rich(er) overnight. Chang himself explained on a conference call to analysts: "I would not consider them a big deal because most of them are mid-szied to small and some are even 6in fabs."

"Some are very small indeed," he added. So, production for those customers will not greatly add to the 2.5 million wafers that get shipped out of TSMC even quarter.

"They are not a big deal in terms of the total foundry business. But they will be important for mature technologies, the legacy-technology part of the foundry business," Chang noted.

Proportion of revenue from IDMs at TSMC and UMC By committing R&D to possibly exotic processes, it demonstrates that TSMC is still very keen to capture business from IDMs - business that the company has been losing since the end of 2007. In times of recession, you would expect the IDMs to pull production back: they have their own fabs to fill. However, production for IDMs at TSMC has been slipping since mid-2007 and, unlike number-two foundry UMC, the share from IDMs did not improve in the quarter just completed, a time when customers are looking to restock after having run inventory to the bare minimum.

Fabless companies will remain the mainstay of all foundries but the IDMs are important for a company that wants to maintain a clear lead over the competition. TSMC still dominates the landscape, with more than double the revenues of UMC.

Another source of expansion is what former CEO Rick Tsai is exploring. He is responsible for looking for new areas of business, something that Tsai helped drive with a push into high-voltage and ultra-low power 180nm and 130nm processes. The two main areas of interest right now are solar panels and LEDs, with much of the emphasis going on solar power. Chang said he has agreed to Tsai's request for $50m in capital spending to kick-start the initiative, although this has not received board approval yet.