Skip to Content

Chip sector avoids a major crisis from Taiwan quake. But one lesson should be learned.

By Therese Poletti

Massive earthquake serves as one more reminder of the importance of a diverse supply chain

The semiconductor industry avoided a potentially crippling crisis this week after its biggest manufacturer, Taiwan Semiconductor Manufacturing Corp., emerged mostly unscathed after Taiwan was struck by its biggest earthquake in 25 years.

TSMC (TW:2330), as it is more broadly known, said in a regulatory filing late Wednesday that while some of its facilities suffered damage from the 7.4-magnitude quake, there was no damage to its most important equipment, and it has restarted most operations.

"I think so far, at least, the chip industry has averted a major disaster," said Patrick Moorhead, founder and chief analyst of Moor Insights and Strategy. "It shows the foresight that the Taiwanese people had with these earthquake precautions."

At TSMC, the company has built-in safety systems for its fabrication plants and its employees. Amazingly, there was no damage to its most critical chip-making tools, including its extreme ultraviolet (EUV) lithography machines.

"It is a two-story laser beam that hits a metallic object and etches the wafer," said Moorhead. The precision required of these instruments to etch the circuits cannot really even be seen by the human eye. "There were some wafers in a certain position that were damaged, but not enough - at least according to some of the larger designers, like Nvidia (NVDA) - where it is going to be any type of issue," he added.

In the broader memory-chip arena, though, operations were not entirely unscathed. Market-research firm Trend Force, based in Taipei, said in a statement that the earthquake notably affected Nanya Technology's (TW:2408) Fab 3A in New Taipei and Micron Technology Inc.'s (MU) Linkou plant. "Both are expected to fully recover within a few days," Trend Force said.

Some memory-chip makers were still evaluating their situations, and had stopped quoting prices to customers. Memory prices will likely increase slightly for a short period of time, according to Trend Force. "While there may be a slight short-term increase in DRAM (dynamic random access memory) spot prices, the continuation of this trend is uncertain due to persistent weak demand," they said.

Micron, which manufactures about 60% of its memory chips in Taiwan, said Wednesday that all of its employees were accounted for, and that it was evaluating its operations and suppliers.

The major earthquake serves as another reminder of why tech companies - and especially chip companies - need to have a diversity of suppliers. Since the pandemic and the supply-chain crisis, some chip manufacturers have begun building fabs outside of Asia, where they've been clustered, including many in the U.S.

"This is another example of why we need to diversify the supply chain, but the debate is over," said Moorhead. "The governments in the U.S., Japan and Western Europe are all developing capabilities."

Intel Corp. (INTC) just this week outlined for investors its current financials for its foundry/manufacturing business, which is expected to see its losses peak this year, and SK Hynix (KR:000660) of South Korea said it was investing $3.87 billion into a plant and research center in Indiana.

Whether or not this will lead to any acceleration of the slow-going process of building the new manufacturing plants, at least in the U.S., is unclear. But the quake should serve as a reminder, and a lesson to all involved in the industry, of the need for more supply-chain diversification.

-Therese Poletti

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

04-05-24 0551ET

Copyright (c) 2024 Dow Jones & Company, Inc.

Market Updates

Sponsor Center