''Our recent field checks suggest there is an increased likelihood that Taiwan Semiconductor will exceed the 2Q guidance range, though there is also increased concern over 2H09 shipments and revenue momentum,'' said Mehdi Hosseini, an analyst with FBR Capital Markets, in a report. FRB has increased its Q2 revenue and EPS estimates, but also lowered its second-half outlook for TSMC (Hsinchu).

''In fact, not only do our checks suggest 40-nm yields but, to our surprise, these have remained below 30 percent, affecting shipments in 2H09,'' he said in the report. ''We believe yields are as low as 20 percent to 30 percent, which may explain the recent management change. We think some key customers who are increasing 40-nm tape-outs have already started to evaluate other foundries (UMC) in case yields do not improve soon.''

TSMC recently acknowledged that it had 40-nm yield issues, but claimed those problems were largely fixed. The ''management change'' involved a recent shake-up at silicon foundry giant TSMC.

As reported, last month, Morris Chang reassumed control of TSMC. TSMC said its board named Chang to serve as chief executive, along with his current position as chairman. He assumes the CEO title from Rick Tsai, who was appointed president and CEO of TSMC in 2005. Chang, 77, will assume day-to-day control of the foundry giant. In his new role, Tsai will serve as president of the New Business Development Organization, which still has an undefined charter.

There are other worries at TSMC. ''As we have been noting over the past few months, increased wafer/die banks (currently, over five weeks verses a prior average of four to five weeks) have recently caused some key customers, like Qualcomm, to cancel 'hot' lots,'' according to the FBR analyst. Hot lots are rush orders that carry shorter manufacturing lead times, with higher average selling prices (ASPs).

''In fact, the buzz among foundry insiders is increased concerns over customers "double ordering." This may have been driven by customers attempting to lock in lower ASPs offered by TSMC in 2Q, though there is also a concern about insufficient sell-through in 3Q, which, combined with above-average wafer/die banks, could cause excess inventories for TSMC's customers,'' he said.

TSMC's sales are projected to hit NT$75.1 billion ($2.3 billion) in Q2, up 90 percent from the previous period but down 14.8 percent from a year ago, according to FBR. Net income is expected to hit NT$24.7 billion $758.2 million) in Q2, up 1,483.6 percent over the previous period and up 0.8 percent year-over-year.

Despite the eye-popping numbers, TSMC is facing competitive threats from Chartered, UMC and others. United Microelectronics Corp. (UMC) is ramping up its 45-/40-nm process.

IBM Corp. and its foundry partners--such as Chartered and Samsung--are slightly ahead of TSMC in high-k technology. IBM's ''fab club'' plans to ship a high-k/metal-gate scheme at the 32-nm node by year's end.

TSMC has recently demonstrated a functional SRAM cell, based on its upcoming 28-nm process, which includes high-k and metal gates for the gate stack.

The 28-nm process will also include a second gate-stack option, based on more conventional silicon dioxide. As previously reported, TSMC is expected to move into 28-nm production in the first part of 2010.