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Eight-inch foundries have seen their fab utilization rates remain high in the third quarter of 2018, but orders from customers have shown signs of a slowdown amid concerns about end market demand not yet seeing notable increases, according to industry sources.

The sources said that many IC designers are turning conservative about vying for 8-inch foundry capacities in the second half of 2018, especially for processing LCD driver ICs and MOSFET chips involving comparatively lower gross margins, as customer order visibility remains unclear.

Taiwan analog IC suppliers said that whether the terminal market demand will pick up significantly can be judged from the sales during the upcoming shopping season in China: the National Day long holidays in early October, and the Alibaba-initiated Single's Day on November 11.

The suppliers said if the sales numbers for the two periods fail to hit new highs, chipmakers would surely slow down the replenishment of their chip inventories in the fourth quarter of the year.

Taiwan MCU suppliers also noted that despite flat market demand, quote hikes by silicon wafer suppliers and foundry houses prompted many domestic and foreign chipmakers to scramble for more foundry capacities in the first half of the year to fabricate IoT and automotive electronics chips, in addition to discrete power chips. This has kept 8-inch foundry fabs in Taiwan and China running at full capacity.

But chipmakers now have seen sufficient inventories, and many smartphone vendors have also adjusted downward their shipment goals for 2018 in response to weak market demand.

The ongoing US-China trade war is also blurring the visibility of orders from terminal customers, and chipmakers are likely to reduce their foundry orders with 8-inch foundry fabs.