Taiwan earthquake underscores fragile nature of global chip supply chain
Upstox
2 min read • Updated: April 3, 2024, 6:35 PM
Summary
Taiwan witnessed its strongest earthquake in 25 years that led to TSMC evacuating its workers at some of its sites. Here’s a look at the fragility of the island nation which is an important part of the global semiconductor supply chain.
After a massive earthquake in Taiwan triggered tsunami warnings, the world’s largest chipmaker Taiwan Semiconductor Manufacturing Company (TSMC) evacuated its workers from some of its factories.
As per latest reports, workers have begun returning to their factories, but the company has suspended operations for the day at these sites.
Shares of TSMC fell over 1% on the Taipei Stock Exchange following the disruption.
Even as the initial assessment does not show a significant impact on global chip supply, the latest event underlines the fragile nature of the ecosystem.
Taiwan is the global leader in semiconductor manufacturing and accounts for nearly 60% of the world’s semiconductor production. This makes it a sensitive part of the supply chain.
Key challenges for Taiwan on being global semi-conductor major
But the country has three major challenges that threaten its glory. First, it is extremely vulnerable to seismic activity with over 40 faults. Second, Taiwan is also the centre of geo-political tensions in the region. Despite the country being independent since 1949, China has been asserting its dominance on the nation, having conducted multiple military drills in the region. Lastly, the labour and power shortages in the country are a major factor in deciding the production.
Being the largest player in the industry, TSMC has looked to diversify its presence beyond Taiwan by building facilities across the US, Germany and Japan.
Coupled with its facilities in China, the company’s production capacity outside of the island nation will increase to 300,000 wafers per month by 2028—equal to over 20% of its present total, a report indicated.
It is unlikely that Taiwan will lose its glory as the global hub of chip manufacturing any time soon. TSMC, for instance, still plans to keep its most advanced chip production in Taiwan. However, over time, other nations are likely to amend policies to attract investments from global chip players that may take away some share from Taiwan.