Taiwan quake sends ripples through chip industry, near-term semiconductor outlook looks uncertain: Report

Taiwan, a pivotal hub in the global semiconductor supply chain, faced a significant challenge on Wednesday as a 7.4 magnitude earthquake rocked its eastern coast, impacting the operations of key chipmakers, as per a CNN report.

Among the major players in Taiwan's semiconductor landscape, Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest chipmaker, found itself grappling with the aftermath of the seismic event. While TSMC's operations primarily reside on the opposite side of the island, the earthquake did result in some disruptions.

“A small number of tools were damaged at certain facilities, partially impacting their operations. However, there is no damage to our critical tools,” TSMC said in a statement late Wednesday. It said overall tool recovery of its chip fabrication facilities reached more than 70% within 10 hours of the earthquake, with new fabs reaching more than 80%, CNN reported. 

TSMC produces an estimated 90% of the world’s most advanced semiconductor chips that are used by tech giants including Apple, Qualcomm, Nvidia and AMD.

Although the company assured the safety of its personnel, it acknowledged that a fraction of its manufacturing tools sustained damage, partially affecting operations. However, crucial equipment remained unscathed, offering a glimmer of hope amidst the chaos. Experts say even an hours-long shutdown of certain chip production could take weeks to recover from, CNN further noted. 

According to a Barclays report, some of the high-end chips need 24/7 seamless operations in vacuum state for a few weeks. "The operation halts could mean some high-end chips in production may be spoiled. TSMC could see a $60 million impact to its second quarter earnings from the disruption," it adds.

However, amidst the turbulence, some companies sought to allay concerns regarding supply chain disruptions. Nvidia, a prominent chip consumer, reassured stakeholders that consultations with its manufacturing partners indicated minimal impact on its supply chain from the earthquake. There could be some near-term supply chain impact, though the quantum is unclear. Also, there could be some increase in chip prices in the near-term, experts point out. While the full extent of the supply chain impact remained unclear, there were anticipation of potential price hikes in chips in the short term.

The earthquake underscored the vulnerability of Taiwan's dominance in chip production and the need for diversification in the semiconductor supply chain. Efforts to bolster chip manufacturing capacities beyond Taiwan have been underway for years, driven by concerns over geopolitical tensions and natural disasters, CNN noted.