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TSMC forced to abandon factory due to Taiwan earthquake, chip production expected to be interrupted, prices increase
The heavy dependence on Taiwan for semiconductor production has been a significant worry for industry heads and government representatives for quite some time. Consequently, numerous government representatives have been encouraging chip manufacturers to broaden and distribute their production facilities beyond Taiwan.
The prices of mobile phones, computers, and almost all other electronic gadgets are expected to increase in the coming months due to the significant 7.4 magnitude earthquake that struck Taiwan today.
Following the most powerful earthquake Taiwan has experienced in 25 years, Taiwan Semiconductor Manufacturing Co. (TSMC) and its rival, United Microelectronics Corp. (UMC), have cleared enormous areas of their plants. This has led to ambiguity concerning chip production at the globally dominant producer of sophisticated chips.
TSMC, the main contract chip producer for large technology companies such as Apple and NVIDIA, had to shift their employees from particular regions. The chip-producing company mentioned that it's currently assessing the repercussions of the 7.4-magnitude earthquake that occurred off the eastern shore of the island. In a related context, UMC halted work at some factories and cleared out buildings in its Hsinchu and Tainan centers.
Companies from Taiwan, such as TSMC and ASE Technology Holding Co., hold a significant share of the worldwide semiconductor market, providing chips for a broad range of products, from iPhones to cars. It is believed that approximately 80-90% of all silicon chips, which are crucial for the functioning of smartphones and AI-operated supercomputers, are produced in Taiwan. These are either in the form of completed System on Chips (SoCs) or as silicon wafers.
Taiwan is situated close to a significant geological fault line where two tectonic plates converge. This positioning results in it being susceptible to regular and occasionally very severe earthquakes.
Taiwan is often hit by earthquakes, and its factories regularly experience small-scale seismic events. Thus, a single large earthquake has the potential to destroy whole sets of meticulously crafted semiconductors.
The safety mechanisms of TSMC are operating as expected. The company has stated that in line with their standard procedures, specific manufacturing units were cleared out to prioritize employee safety. They are presently evaluating the degree of the incident's impact.
Dependence on Taiwan for semiconductor production has been a significant worry for business heads and governmental authorities for quite some time.
The COVID-19 pandemic intensified an existing worldwide scarcity of semiconductors, shedding light on the vulnerabilities in global supply chains related to silicon chips. Industries globally struggled with a significant chip deficit, and the available chips were being marketed at three to four times their standard price.
Scalpers have been purchasing NVIDIA's GPUs, which are utilized in gaming and video editing computers, cryptocurrency mining, and currently AI applications, in order to make a fast profit. These GPUs have been resold for a premium ranging from 50% to 250%.
Government representatives globally have been encouraging businesses in Taiwan, including TSMC, to spread their production sites across different locations. This is due to the possible risks to Taiwan's stability. Besides its vulnerability to natural disasters such as earthquakes and tsunamis, Taiwan also has to cope with an unpredictable and challenging China.
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