According to industry executives, Nvidia and AMD-ATI have placed more orders with Taiwan Semiconductor Manufacturing Co. (TSMC) for its 40-nanometer process since the beginning of this quarter, and the two graphic-chip vendors say TSMC has significantly improved the yield rate of the leading-edge process.

Insiders point out that the two graphic-chip vendor had been discontented with TSMC’s yield rate with the 40-nm process until recently, when the rate has been improved to 60% from 30%.

They add that the improved yield rate will prompt the two vendors to increase 40-nm contracts to TSMC after August so their new products designed on the 40-nm rule can meet the September back-to-school and December Christmas shopping seasons.

TSMC’s boon has turned out to be a bane for the nearest rival United Microelectronics Corp. (UMC). According to industry executives, the two graphic-chip suppliers have reduced contracts to UMC using 65-nm and 55-nm processes while increasing 40-nm contracts to TSMC.

UMC will begin pilot run of its 40-nm process this quarter while TSMC will kick off work on the pilot production of its 28-nm process.

TSMC defines its 28-nm process as “full-node” technology adopting high-K metal gate type and SiON type. Commercial production is projected for the first quarter of next year. AMD, Nvidia, and Qualcomm are working with TSMC on the next-generation process.