Taiwan Semiconductor Manufacturing Company has scheduled a ramp up of monthly capacity at its 300mm (12-inch) wafer fab (Fab 14) to 6,000 wafers by the end of 2009, and to about 35,000 wafers in 2010, Digitimes reports.

The foundry is now purchasing backend packaging and testing equipment and plans to allocate capacity of 5,000 – 6,000 wafers for production of Intel Atom-based processors on a 40nm process.

Earlier this year, Intel and TSMC reached an agreement that they would collaborate on system-on-chip (SoC) based on the Atom processor. Under the agreement, Intel would port its Atom processor CPU cores to the TSMC technology platform including processes, IP, libraries, and design flows. This partnership will reportedly help Intel lower its cost structure to better compete in the mobile space, especially against ARM-based processors.

TSMC is also said to be reserving some capacity for production of Larrabee graphics chips in the future. However, Intel claimed the Larrabee silicon demoed at IDF did not come from TSMC.