Mobile bubble faces burst

It is starting to look like outfits which bet the farm on smartphones and tablets taking off are really suffering.

Digitimes has been reporting that contract chipmakers TSMC and UMC have been told by their clients to slash the number of wafer starts for the third quarter of 2011.

The outfits had made too many chips anyway, expecting that the world and its knackered, wheezing old dog would want a smartphone or a tablet.

They had also gone flat out after the Japanese earthquake because of concerns for supply chain interruptions.

TSMC warned that third-quarter wafer starts would increase 10-12 percent on quarter, according to Digitimes‘ sources. But, growth may only reach 7-9 percent.

It has been bringing in contingency plans such as flexible discounting to deal with the possibly slow third quarter.

UMC admitted its customers were being cautious about placing orders. Average selling prices for the third quarter may face downward pressure because orders are not adequate to fill up its expanded capacity boots, UMC said.

UMC currently has about half of its revenues coming in from the handset sector.

While sceptics would say that it was only Taiwanese outfits who bet the farm on tablets and smartphones, it does appear that the whole industry is in for a rude shock if the mobile bubble is bursting.

It seems that the only outfit which is really benefiting from the boom in tablets has been Apple and even it seems to be depending on reselling to its closed market.