One of the big impacts of the recent earthquake in semiconductor powerhouse Taiwan, the strongest earthquake (7.4 magnitude) in the past 25 years, will be on the chip supply chain. Taiwan is the hub of semiconductor manufacturing, with most of the leading fabs situated across the country.
Short-term chip delays expected
Counterpoint Research anticipates a minor to potentially moderate impact on chip production capacity, depending on the final assessment of damage. This could result in perhaps a maximum of a week or so of delay, but given the slow season, the overall impact would be minimal.
US-based Micron Technology, which has factories in Taiwan, is evaluating the impact on its operations. Responding to Business Today’s query, the company stated, “Micron Technology Inc. today reported that following the earthquake that struck Taiwan on April 3, 2024, all of Micron’s team members have been accounted for and reported to be safe. Our thoughts are with those affected and their families. We are evaluating the impact on our operations and supply chain. We will communicate changes to delivery commitments to our customers after this evaluation is completed.”
After the tremors, Taiwan Semiconductor Manufacturing Company (TSMC) was reported to have moved staff from certain factories but was likely to resume production overnight. Neil Shah, Partner & Co-Founder at Counterpoint Research, told Business Today that while major foundries like TSMC haven’t reported widespread disruptions, the TSMC N3 fab (volume production using its 3 nm semiconductor node was underway) in Tainan is the most affected area so far. EUV (extreme ultraviolet lithography) operations at this facility have been halted.” He adds that a partial recovery is expected. “TSMC’s Hsinchu factory is expected to resume partial production lines within 6 hours. TSMC is currently undergoing inspections to assess the overall impact on its facilities.”
However, Counterpoint Research believes this is likely to lead to production delays, with estimates ranging from 6–10 hours depending on the severity of the damage and the recovery timeline.
Monetary impact
The earthquake will not only have an impact on Taiwan’s semiconductor ecosystem, including Fab and ATP players, resulting in 6–10 hours, depending on the severity of the damage and the recovery timeline, but also impact the electronics ecosystem.
Danish Faruqui, CEO, Fab Economics, a US-based boutique semiconductor Fab/ATMP/OSAT Greenfield projects advisory, told Business Today, “As per Fab Economics R&A across TSMC, UMC, Micron, ASE, Nanya, Windbond, PowerTech, Foxconn, and other semiconductor upstream and downstream players in Taiwan, the total direct impact could be as high as $500 million. It is important to note that the indirect impact is higher when it comes to the semiconductor industry. A tiny $50 chipset can hold the production and thus revenue of $35,000 automotive for the end-markets industry relying on the semiconductor industry.” Faruqui adds, “The ripples of semiconductor ecosystem disruption in Taiwan will be felt across almost every part of the world and across every end market industry, from data centers, consumer electronics, mobiles, automotive, aviation, industrial, networking, the Gen AI ecosystem, and a lot more.”
Taiwan houses around 64.8% of foundry capacity across logic and memory chips and over 90% of capacity for the world’s most advanced chips across 5, 4, 3nm technology nodes, per Fab Economics R&A.
Expanding semiconductor supply chain
After the Covid-19 pandemic, Taiwan’s earthquake serves as a stark reminder of the fragility of the semiconductor supply chain. As the reports are coming in, the exact impact on chip shortages in the future, if any, cannot be envisioned as of now. “There could, however, be a temporary shutdown in production to assess structural damage to facilities, carry out a risk assessment as per procedures, situational evacuation, etc., but all this may not affect long-term metrics,” says Anurag Awasthi, Vice President, IESA. He adds, “It is a gentle reminder of the fragility of present global supply chains, which need diversification, the downside of geographical aspects of technology, and the importance of incorporating natural disasters in forecasting and planning at all levels.”
While steps have already been taken by nations like the US and India to bring semiconductor manufacturing in-house, countries must prioritise efforts to diversify and fortify the semiconductor supply chain, which is concentrated in a select few nations.