Equities

Taiwan's Semiconductor Industry Resilient After 7.4 Magnitude Earthquake

Taiwan recovers from a 7.4 magnitude quake with TSMC resuming production, ensuring minimal global semiconductor supply chain disruption.

By Mackenzie Crow

4/3, 22:18 EDT
Apple Inc.
NVIDIA Corporation
Taiwan Semiconductor Manufacturing Company Ltd.
United Microelectronics Corporation
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Key Takeaway

  • Taiwan's recovery from a 7.4 magnitude earthquake is underway, with TSMC resuming production and reporting no critical damage to chip-making equipment.
  • TSMC and UMC's rapid response highlights the resilience of Taiwan's semiconductor industry, crucial for global tech supply chains.
  • Despite initial concerns, analysts believe the quake's impact on semiconductor supply will be limited, maintaining optimism for continuous production.

Earthquake Recovery Efforts

Taiwan is in the process of recovery following its most severe earthquake in 25 years, with a magnitude of 7.4 striking the island's east coast. The quake prompted immediate responses from emergency personnel aiding injured and trapped citizens, and key industries, notably the semiconductor sector, began assessing and mitigating the impact. Taiwan Semiconductor Manufacturing Co. (TSMC), a pivotal player in global semiconductor production, evacuated staff and halted operations as a precaution but reported plans to resume production swiftly, with no critical damage to its chip-making equipment. The government's proactive measures in updating building codes after a devastating earthquake in 1999 have been credited with minimizing the damage and casualties this time around.

Semiconductor Industry's Swift Response

TSMC, the world's largest advanced chipmaker, and United Microelectronics Corp. (UMC), another significant industry player, were among the companies that took immediate action following the earthquake. TSMC was able to bring 70% to 80% of its machinery back online within 10 hours, including its most expensive extreme ultraviolet machines used for creating advanced processors. The company confirmed that there was no damage to its critical tools, although a small number of tools at some facilities were affected. UMC also reported no major impact on its operations and planned to restart normal operations and shipments promptly. This rapid response underscores the resilience and preparedness of Taiwan's semiconductor industry, which is crucial for the global supply of advanced chips.

Global Economic Implications

Taiwan's role in the global economy is significant, especially in the semiconductor industry, where it is estimated that national companies, led by TSMC, produce 80% to 90% of the world's highest-end chips. These chips are essential for a wide range of technologies, from artificial intelligence and smartphones to electric vehicles. The earthquake's initial impact raised concerns about potential disruptions to the semiconductor supply chain, given the industry's need for continuous, uninterrupted production processes. However, analysts from Citigroup Inc. and Jefferies Financial Group Inc. have since expressed optimism, suggesting that the impact on TSMC's operations should be manageable and the downside limited.

Street Views

  • Bum Ki Son and Brian Tan, Barclays (Neutral on Taiwan's semiconductor industry):

    "Some of the high-end chips need 24/7 seamless operations in a vacuum state for a few weeks. Operation halts in Taiwan’s northern industrial areas could mean some high-end chips in production may be spoiled."

  • Citigroup Inc. Analysts (Optimistic on TSMC):

    "The impact on TSMC’s operations should be 'manageable'."

  • Jefferies Financial Group Inc. Analysts (Optimistic on TSMC):

    "Thankfully, building codes were fully revised following that disaster and harm so far looks limited even at the epicenter."