Lead times at foundries are shrinking, with 8-inch manufacturing falling to less than two weeks compared to over 10 weeks earlier in 2010, according to sources at Taiwan-based IC designers.

Meanwhile, lead times for 6- and 12-inch wafer processes have also dropped to about three weeks, the sources said.

In the first half of 2010, many fabless IC suppliers had to place orders to their foundry partners 3-4 months in advance to compete for capacity, the sources indicated. Early in the second quarter before the debt crisis hit Europe, chip suppliers maintained their book-to-bill ratios between 1.2 and 1.5, the sources said.

Weaker-than-expected demand since the latter part of the second quarter has prompted system makers to start early inventory adjustments, the sources observed.

Though inventory levels at chip suppliers are growing, foundry service providers still see order visibility extend to the first quarter of 2011, commented Nobunaga Chai, analyst for semiconductor at Digitimes Research. Major foundries are expected to maintain their utilization rates at above 90% over the next two quarters, Chai said.

However, foundry quotes will have little room to grow in the near term due to a demand-supply balance, Chai added.