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Taiwan's earthquake compels TSMC to vacate its manufacturing plant, causing probable chip supply interruptions and a spike in prices
The over-reliance on Taiwan for chip production has been a significant worry for industry chiefs and governmental authorities for quite some time. Consequently, numerous officials have been encouraging semiconductor manufacturers to broaden and diversify their production facilities beyond Taiwan.
The prices of mobile phones, computers, and nearly all other electronic gadgets are expected to rise in the coming months due to the massive 7.4 magnitude earthquake that struck Taiwan earlier 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 out substantial areas of their plants. This has led to doubts about chip production at the world's top producer of sophisticated chips.
TSMC, the main supplier of chips for technology powerhouses such as Apple and NVIDIA, had to move their employees from particular regions. The chip manufacturer is currently assessing the consequences of the 7.4-magnitude earthquake that struck near the east coast of the island. Similarly, UMC stopped production at some factories and emptied out buildings in their Hsinchu and Tainan centers.
Companies from Taiwan, such as TSMC and ASE Technology Holding Co., have a significant share in the worldwide semiconductor market, providing chips for different products ranging from iPhones to cars. It's believed that Taiwan produces about 80-90% of all silicon chips used in smartphones and AI-based supercomputers, either as complete System on Chips (SoCs) or as silicon wafers.
In terms of geography, Taiwan is situated close to a significant fault line where two tectonic plates converge. This makes the region susceptible to regular and occasionally immensely powerful earthquakes.
Taiwan frequently experiences earthquakes, and its factories are often affected by minor seismic disturbances. A single large earthquake could potentially destroy whole sets of meticulously manufactured semiconductors.
"TSMC's security measures are operating as they should be. In alignment with company policy, specific factories were cleared to guarantee the safety of the staff," the company announced in a press release. "We are presently evaluating the scale of the impact."
For years, industry leaders and government officials have been deeply worried about the overdependence on Taiwan for the production of semiconductors.
The COVID-19 pandemic intensified an already existing worldwide scarcity of semiconductors, underscoring the vulnerabilities within global supply chains in relation to silicon chips. A significant chip shortage was experienced by industries globally, and the chips that were on the market were being traded at 3-4 times their standard price.
Scalpers have been purchasing NVIDIA's GPUs, which are typically used in gaming and video editing computers, crypto mining, and currently in AI applications, with the intention of making fast money. These are resold at a price range that is 50 to 250 per cent higher than the original cost.
In light of these worries, global government authorities have been encouraging Taiwanese firms, such as TSMC, to spread their manufacturing sites across various locations, keeping in mind the possible risks to Taiwan's stability. Besides being vulnerable to earthquakes and tsunamis, Taiwan has also had to grapple with an unpredictable and troublesome China.
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