TAIPEI — TSMC said it scrapped a batch of wafers after using substandard photoresist at one of its largest fabs in southern Taiwan.

The glitch affected production of 12/16-nm wafers at Fab 14B in Tainan, where the company makes chips for customers including MediaTek, HiSilicon and Nvidia. As a result, TSMC cut about $550 million, or about 7% from its previously forecast $7.4 billion in revenue for the first quarter of this year.

The incident is the second production disruption linked to suppliers in less than six months. Last August, TSMC idled its fabs for three days after discovering that newly installed equipment was infected with the WannaCry virus.

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The world’s largest foundry was estimated to have scrapped as many as 30,000 wafers as a result of the photoresist mistake, according to a report provided to EE Times by investment bank Credit Suisse. Weak overall demand in the chip industry should soften the impact, the report said.

“We believe most of the chips produced on the 16/12nm line are supplied to MediaTek, HiSilicon and Nvidia,” Credit Suisse analyst Yoshiyasu Takemura said in the report. “However, given that Nvidia downgraded Nov–Jan sales guidance on 28 January, and demand for Chinese smartphones has been weak since November, we think wafer inventories are high, which should allow users to cover the shortfall from discarded wafers without placing extra orders.”

While it didn’t name affected customers, the foundry “has worked out replacement and delivery schedules with each of them,” TSMC said in a press statement. The company said it has “taken action to strengthen inline wafer inspection and tighten control of incoming material to deal with the increasing complexity of leading-edge technologies.”

TSMC’s photoresist suppliers include Shin-Etsu Chemical, JSR and Dow Chemical. While the foundry declined to identify the source of the defective chemical, the Nikkei Asian Review reported that the batch probably came from Dow Chemical.

There was no information from any sources on whether other chipmakers used the faulty photoresist in their production.

In its statement on the photoresist issue, TSMC said it has accelerated the start of some production originally planned for the second quarter, which will contribute around $230 million in additional revenue for the January-March period.

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