Taiwan quake to some hit chip output, cause Asia supply chain disruptions, analysts say

Powerchip Semiconductor Manufacturing

03/04/2024 13:14

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      Taiwan chipmakers suspend some production for inspections
    

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      Halts to disrupt supply chain, analysts say
    

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      Electronics manufacturers may face price pressures
    

  
    By Liam Mo and Brenda Goh
       BEIJING, April 3 (Reuters) - Taiwan's biggest earthquake
since 1999 is likely to cause some disruption across Asia's
semiconductor supply chain, analysts say, after chipmakers from
TSMC to UMC halted some operations to inspect facilities and
relocate employees.
    The powerful 7.2-magnitude earthquake struck Taiwan's
eastern coast near Hualien County on Wednesday morning, killing
nine people and injuring 800. 
    The island plays an outsized role in the global
semiconductor supply chain as it is home to
the world's largest chipmaker Taiwan Semiconductor Manufacturing
Co (TSMC)  2330.TW , which supplies chips to the likes of Apple
 AAPL.O  and Nvidia  NVDA.O , and smaller chipmakers including
UMC  2303.TW , Vanguard International Semiconductor  5347.TWO ,
and Powerchip Semiconductor Manufacturing  6770.TW .
    While most of their facilities are not close to the
earthquake's epicenter, many of these firms said they had
evacuated some of their manufacturing plants and shut down some
facilities for inspections. 
    "To ensure the safety of personnel, some fabs were evacuated
according to company procedure," TMSC said in a statement,
adding later that the employees had begun to return to work.
    TSMC, whose facilities in Hsinchu, Tainan and Taichung have
experienced varying degrees of disruptions, may have to delay
some shipments and increase wafer input to compensate for this,
consultancy Isaiah Research said in a note. 
    "Mitigating the impacts of the earthquake necessitates
careful measures and time to restore production and uphold
quality standards, presenting additional implications and
obstacles," they said. 
    TSMC's Tainan operations for advanced process nodes, such as
4/5nm and 3nm, were temporarily suspended, they said. In
addition, the extreme ultraviolet (EUV) lithography equipment
crucial for these advanced nodes was halted at the site for a
period of 8-to-15 hours.
    Barclays analysts said some highly sophisticated
semiconductor fabs need to operate seamlessly 24/7 in a vacuum
state for several weeks and the halts would disrupt the process,
pushing up pricing pressure in the sector.
    This could spillover to cause a "short-term hiccup" to
electronics manufacturing in economies focused on upstream
products, such as Japan and Korea, as well as economies focused
on downstream products, such as China and Vietnam, they said 
    However, the report noted that lower inventory levels among
customers could allow Taiwanese and Korean chipmakers to raise
prices.

 (Reporting by Liam Mo and Brenda Goh; Additional reporting by
Sarah Wu; Editing by Sharon Singleton)
 ((liam.mo@thomsonreuters.com;))