Mexico City.– Taiwan is prone to earthquakes because it is near the convergence of two tectonic plates. However, it is also the source of 80 to 90 percent of the high-end chips needed for advanced applications such as smartphones and artificial intelligence.
Taiwan Semiconductor Manufacturing Company Limited, TSMC, is the main chip manufacturer contracted by Apple and Nvidia to manufacture their processors, suspended operations after the earthquake that shook the island in the last few hours.
According to the firm, it evacuated its employees from some of its plants in Hsinchu, southwest of Taipei.
The company has four factories, better known as Gigafabs, that produce 12-inch chip wafers, in addition to four facilities that produce 8-inch wafers and one that manufactures 6-inch wafers; all of them in Taiwan.
In the same country, it also adds affiliated companies such as TSMC Nanjing Company Limited, which produces 12-inch wafers, as well as two factories it owns responsible for 8-inch wafers.
Industry executives and U.S. government officials have long warned of the dangers of concentrating global production of advanced semiconductors on an island that, natural shocks aside, is considered a potential military hotspot. This became especially evident during the Covid era, which exacerbated global shortages of these vital components.
American authorities, aware of the threat posed to Taiwan by the mainland Chinese government, which considers the island a renegade province, have pressured American and Taiwanese companies – including TSMC – to diversify geographically.
But TSMC’s expansion projects underway in Japan and the US will take time to reach full speed, and US companies such as Micron Technology Inc. continue to maintain significant operations on the island.
Manufacturers affected after earthquake
“There is no damage to our critical tools, including all extreme ultraviolet lithography tools,” TSMC said in a statement. A small number of tools were damaged at some facilities, but the company is deploying all available resources to ensure a full recovery, he added.
United Microelectronics Corp., its smaller local rival, also stopped machinery at some plants and evacuated certain facilities at its Hsinchu and Tainan centers, it said in a statement.
Taiwanese companies, from TSMC to ASE Technology Holding Co., manufacture and assemble most of the semiconductors that go into devices ranging from iPhones to cars, in factories vulnerable to even the slightest tremors.
A single vibration can destroy entire batches of precision semiconductors. Shares of TSMC, which is publicly traded in the United States, rose 1.6 percent on Wednesday morning in New York, while those of UMC were little changed.
According to Bloomberg Intelligence analysts, strong demand for the company’s advanced node processes will cushion the potential financial effects of the quake, reflecting analysts’ general expectations of a limited impact.
Some of the island’s technology companies are still assessing the damage from the earthquake, which leveled dozens of buildings in its eastern part and killed at least nine people.
Meanwhile, Barclays analysts pointed out that any interruption in production threatens to disrupt a process that would involve suspending development for weeks, especially in the case of sophisticated semiconductors.
“Some of the high-end chips need uninterrupted operations in a vacuum state for a few weeks,” said analysts Bum Ki Son and Brian Tan. “The shutdown of operations in Taiwan’s northern industrial zones could mean that some high-end chips high-end in production could break down.
Micron said it is evaluating its operations and supply chain, but that all staff are safe following the recent earthquake.
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