Semiconductor Industry Adapts Amid Global Shifts and Taiwan Earthquake

Nvidia's stock rises as it ensures earthquake won't affect its supply chain, highlighting shifts in global semiconductor manufacturing to the U.S.

By Mackenzie Crow

4/4, 06:01 EDT
NVIDIA Corporation

Key Takeaway

  • Nvidia's stock slightly up at $895.45 premarket, showing resilience after Taiwan earthquake; TSMC facilities largely unaffected.
  • Nvidia to source chips from TSMC's Arizona plants, part of a shift to diversify semiconductor manufacturing amid geopolitical tensions.
  • TSMC's U.S. expansion reflects political strategy over economic, with $92 billion investment despite industry downturn and production delays.

Resilience Amid Earthquake

Nvidia's stock saw a slight increase of 0.7% in premarket trading to $895.45 on Thursday, following a minor decline of 0.6% the previous day. This movement comes in the wake of an earthquake in Taiwan, which resulted in at least nine fatalities. Nvidia, in an emailed statement, assured that the earthquake would not impact its supply chain, highlighting the resilience of Taiwan's semiconductor industry despite the natural disaster.

Taiwan Semiconductor Manufacturing Company (TSMC), a key player in the global semiconductor market, also reported minimal damage to its facilities. The company managed to return its fabs to 70% operational capacity within 10 hours post-quake, with newer facilities operating at over 80% capacity. TSMC's statement emphasized that there was no significant damage to its most critical equipment, including extreme ultraviolet lithography tools, ensuring minimal disruption to its operations.

Global Semiconductor Landscape Shifts

The earthquake's limited impact underscores the ongoing global efforts to diversify semiconductor manufacturing due to national security concerns and government incentives. South Korea's SK Hynix and other semiconductor manufacturers are part of this shift, with Nvidia planning to source chips from TSMC's under-construction facilities in Arizona. Despite delays attributed to skilled labor shortages, there is anticipation for mass production to commence by the end of the year.

This move aligns with broader industry trends, as companies like Apple seek to secure chip supplies against geopolitical tensions and supply chain disruptions. TSMC's expansion into Arizona, supported by U.S. government incentives under the 2022 Chips and Science Act, represents a significant step towards reducing reliance on Taiwan's semiconductor production, which is central to global tech advancements and military applications.

Economic and Political Considerations

TSMC's global expansion, including its Arizona project, comes amid a downturn in the semiconductor industry, with sales expected to fall by 10% from 2022 levels. The company's capital expenditure is projected to reach $92 billion through 2025, impacting its free cash flow. Analysts suggest that TSMC's decision to build in Arizona was influenced more by political considerations than economic ones, given the rising tensions with China and the strategic importance of securing semiconductor supplies.

The delays in TSMC's Arizona factories, including the postponement of its second factory's production to 2027 or 2028, have raised concerns about the U.S.'s ability to achieve domestic chipmaking independence. These developments challenge the objectives of the Chips Act, which aims to bolster U.S. semiconductor manufacturing capabilities.

Management Quotes

  • Nvidia spokesperson:

    "Nvidia doesn’t expect any impact to its supplies from the earthquake in Taiwan on Wednesday that left at least nine people dead."