Taiwan earthquake: Will chip output, global supply of tech components be disrupted?

Taiwan was jolted by its worst earthquake in the past 25 years on Wednesday, April 3, which led to the death of at least nine persons and left more than 1,000 injured. With the country still recovering from the devastation, concerns have been raised about whether Taiwan’s semiconductor chip output and supply of key technology components to the global market will be disrupted.

The earthquake, which was 7.2-magnitude strong, struck Taiwan’s eastern coast close to Hualien County. While none of the major chipmakers have their plants close to the epicentre, the operations were impacted due to the precautionary measures.

Notably, Taiwan is home to the world’s largest chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC), which supplies to tech majors like Apple and Nvidia. Some of the other crucial chipmakers that are based in the island-nation are UMC, Vanguard International Semiconductor, and Powerchip Semiconductor Manufacturing.

The fatalities due to the quake were all reported in Hualien, with most being the result of rockfalls (Image: CNA)

Will Taiwan’s earthquake affect chip output?

While concrete data is yet to emerge, analysts say that some amount of impact could be felt on the quarterly output, as chipmakers in Taiwan have been using automatic shutdown systems that are aimed at minimising the damage to their production tools in the wake of disasters.

The tools that are linked to the automatic shutdown systems require 36-48 hours to be revived after they are closed by the system in view of an earthquake-like activity, Dan Hutcheson, vice chair at technology research firm TechInsights was reported as saying.

"When you look at the business side of it - will this affect quarterly revenues? - the odds are it won't. But it's going to be a real headache for everyone involved to get this stuff back up and running,” news agency Reuters quoted him as saying.

Taiwanese media covering the rescue operations (Image: CNA)

Even though chipmakers are not located close to the region impacted by the earthquake, several among them evacuated their plants, and some have ordered closures of their manufacturing facilities till they are thoroughly inspected.

TSMC on April 1 said the operations at its sites where operations were halted will resume after inspections. At some of the impacted facilities, the production was to restart overnight, as per reports.

The company reportedly noted that within 10 hours of the earthquake, it recovered 70% of the production tools at its chip fabrication facilities. The rate was higher at 80% for new fabs.

Local firefighters worked round the clock to minimise the casualties due to the earthquake in Hualien (Image: CNA)

Will the earthquake hit supply of key tech components?

Analysts at Barclays said some semiconductor fabs, that are highly sophisticated, are required to operate round the clock in a vacuum state for several weeks. The output in such cases could be affected due to the brief halts following the earthquake.

This in turn may lead to a “short-term hiccup” in supply of chips to countries like Japan and South Korea that manufacture upstream electronic products, as well as countries like China and Vietnam that produce downstream electronic items, they said, adding that it may also lead to pricing pressures in this sector.

Research firm TrendForce suggested that any disruption in chip supply may affect the shipments of television panels, as TV manufacturers have been operating at almost their full capacities to meet the surging global demand.

Since some facilities of TSMC have faced disruption, the company may have to consider the option of delaying some shipments and increasing wafer input as compensation, a note issued by consultancy firm Isaiah Research said.

Notably, TSMC also manufactures the chips for Nvidia, the US-based AI computing firm whose stock has skyrocketed in recent period. Nvidia claimed that it has communicated with its manufacturing partners in Taiwan, and does not expect disruption in supply due to the earthquake.