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TSMC forced to vacate factory due to Taiwan earthquake, potential disruption in chip availability, prices skyrocket
The heavy dependence on Taiwan for semiconductor production has been a significant worry for industry heads and government authorities for a while now. Consequently, multiple government representatives have been encouraging chip manufacturers to broaden and vary their production bases beyond Taiwan.
The cost of mobile phones, personal computers, and nearly all other electronic gadgets are expected to rise in the coming months. This is due to the significant earthquake, measuring 7.4 on the Richter scale, that struck Taiwan earlier today.
Following the most significant earthquake Taiwan has experienced in the last 25 years, Taiwan Semiconductor Manufacturing Co. (TSMC) along with its rival, United Microelectronics Corp. (UMC), have cleared out significant portions of their manufacturing sites. This move has caused doubts regarding the chip production at the world’s top producer of sophisticated chips.
TSMC, the main supplier of microchips for tech heavyweights such as Apple and NVIDIA, had to move their employees from particular zones. The company announced that it's assessing the consequences of the 7.4-magnitude earthquake that hit off the eastern coast of the island. Likewise, UMC halted production at some factories and cleared out its Hsinchu and Tainan centers.
Companies from Taiwan, such as TSMC and ASE Technology Holding Co., are leading players in the worldwide semiconductor industry, producing chips for a wide range of products, including iPhones and cars. It's believed that Taiwan is responsible for producing approximately 80-90% of all silicon chips that energize smartphones and AI-driven supercomputers, whether as completed SoCs or as silicon wafers.
In terms of geography, Taiwan is situated close to a significant fault line, where two tectonic plates converge. This puts it at risk of regular and occasionally highly destructive earthquakes.
Taiwan is often subject to earthquakes, and even small seismic events can impact Taiwanese factories. A single significant earthquake can potentially destroy whole sets of meticulously crafted semiconductors.
"TSMC's safety measures are operating as they should. In line with company procedures, specific manufacturing sites were cleared to guarantee the safety of our staff," the company mentioned in a press announcement. "We are presently evaluating the scope of the impact."
For years, industry leaders and government officials have been seriously worried about the excessive dependence on Taiwan for semiconductor production.
The COVID-19 pandemic intensified the worldwide scarcity of semiconductors, revealing the vulnerabilities within the international supply chains concerning silicon chips. Not only were industries globally confronted with a significant chip deficit, but the chips that were accessible were being marketed at three to four times their normal price.
Scalpers have been purchasing NVIDIA's GPUs, which are used in PCs for gaming, video editing, crypto mining, and now AI applications, and reselling them at prices ranging from 50 per cent to 250 per cent higher, aiming to make a fast profit.
In addressing these issues, global authorities are advising Taiwanese firms, such as TSMC, to spread out their manufacturing facilities to various locations, considering the possible risks to Taiwan's stability. Besides being susceptible to natural disasters like earthquakes and tsunamis, Taiwan has also had to grapple with an unpredictable and challenging China.
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