Friday 24 May 2024
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(April 3): Taiwan Semiconductor Manufacturing Co (TSMC) halted some chipmaking and evacuated plants, after the biggest earthquake to hit its home island in 25 years, raising concerns about disruptions to the global tech supply chain. 

TSMC, the main contract chipmaker to Apple Inc and Nvidia Corp, moved staff out of certain areas, and said it’s assessing the impact of a temblor measuring 7.4 in magnitude off the east coast. Smaller local rival United Microelectronics Corp also halted machinery at some plants, and evacuated certain facilities at its hubs of Hsinchu and Tainan, it said in a statement.

Taiwanese firms from TSMC to ASE Technology Holding Co make and assemble the vast majority of the semiconductors that go into devices from iPhones to cars, from factories vulnerable to even the slightest tremors. A single vibration can destroy entire batches of the precision-made semiconductors. TSMC shares slid 1.3%, while UMC was down nearly 1%.

The island’s tech firms are still assessing the impact of the earthquake, which levelled dozens of buildings on its eastern side, and killed at least four people. On Wednesday, TSMC said staff were beginning to return to evacuated sites, though it stressed it was examining the impact. Still, any halt in production threatens to upset a process that — especially for sophisticated semiconductors — can require uninterrupted seclusion in a vacuum for weeks on end, Barclays analysts wrote.

“Some of the high-end chips need 24/7 seamless operations in a vacuum state for a few weeks,” analysts Bum Ki Son and Brian Tan said. “Operation halts in Taiwan’s northern industrial areas could mean some high-end chips in production may be spoiled.”

Taiwan is prone to quakes, because it’s near the convergence of two tectonic plates. Yet, it is also the source of an estimated 80% to 90% of the highest-end chips required for advanced applications, such as smartphones and artificial intelligence.

Industry executives and government officials have long called out the dangers of centring the world’s advanced semiconductor production on an island that, apart from natural shocks, is considered a potential military flashpoint. That became particularly evident during the Covid-19 era, which exacerbated a global shortage of the vital components.

American officials, mindful of the threat to Taiwan from a mainland Chinese government that considers the island a renegade province, have pushed US and Taiwanese companies — including TSMC — to diversify geographically. 

But TSMC expansion projects now under way in Japan and the US will take time to get up to full speed, and American companies such as Micron Technology Inc still maintain major operations on the island.

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