TSMC Shutters Some Chipmaking Plants As Quake Rocks Island Nation

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by Tyler Durden
Wednesday, Apr 03, 2024 - 11:45 AM

Taiwan Semiconductor Manufacturing Co., the leading contract chipmaker for Apple Inc. and Nvidia Corp., shuttered some of its chipmaking capacity and evacuated plants after the biggest earthquake in 25 years rocked the island nation, just east of mainland China. 

Taiwan plays a significant role in manufacturing advanced chips for artificial intelligence, smartphones, computers, and electric vehicles. The country is estimated to produce 80% to 90% of the highest-end chips. 

As the news of a 7.4-magnitude quake off Taiwan's east coast disrupts chipmaking, the implications for the global tech supply chain, including potential future disruptions like a war with China, are causing significant concern among Wall Street analysts. 

Bloomberg reports that some of TSMC's "staff were beginning to return to evacuated sites, though it stressed it was examining impact." 

However, Barclays analysts warned that any production halts could threaten the production process of advanced chips that require uninterrupted seclusion in a vacuum for weeks. 

"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.

The analysts continued, "Operation halts in Taiwan's northern industrial areas could mean some high-end chips in production may be spoiled."

Whether it's a natural disaster or a geopolitical event like a Chinese invasion, Peter Kleinhans, director of the technology and geopolitics project at Berlin-based think tank Stiftung Neue Verantwortung, has warned that Taiwan, as the potential most critical single point of failure in the global semiconductor supply chain, cannot be overlooked. And this is why the Biden administration is attempting to rebuild America's chip manufacturing base. 

Besides TSMC, local rival United Microelectronics Corp. also halted chip production at some plants and evacuated certain facilities. 

In markets, Taiwanese stocks followed regional peers lower but absent a significant selloff following the quake. Shares of TSMC on the Taiwan Stock Exchange closed down 1.27%. In the US, shares of Nvidia in New York are down around 1% in premarket trading.