How does the earthquake in Taiwan (China) affect the semiconductor chip manufacturing industry?

Taiwan’s role in semiconductor supply

A building collapsed after an earthquake in Taiwan (China) on April 3. Photo: THX/TTXVN

After the earthquake killed 9 people and injured more than 1,000, many semiconductor chip manufacturing companies, including chip giant TSMC, stopped production lines for several hours.

Although this period is not too long, even a short interruption can have a big impact on supply. The production of microchips or semiconductor chips is a process that requires high precision, often taking place uninterrupted for 24 hours/day, 7 days/week for many weeks.

Although most of the affected semiconductor chip factories are located in the western part of Taiwan, far from the epicenter, the resulting aftershocks could also carry enough impact to destroy production lines. chip output is active.

Meanwhile, the world is already in a state of shortage of semiconductor chips after the COVID-19 pandemic because the demand for technology products such as smartphones, laptops, and desktop computers has increased sharply. This leads to price increases and shipping delays. The average wait time for semiconductor chips has increased from 11 weeks in March 2017 to 15 weeks in January 2021.

This shortage does not only affect the mobile phone and laptop manufacturing industry. Even the auto manufacturing industry suffered the same fate, leading to disruptions in new vehicle deliveries.

Professor David Bader at the Data Science Institute at the New Jersey Institute of Technology (USA) analyzed that the entire world currently operates on semiconductor devices that power everything from mobile phones , cars to military defense systems… “If production is stopped, it will be devastating,” he feared.

Recovery efforts

Rescuers search for victims trapped in a building destroyed by an earthquake in Taiwan (China) on April 3. Photo: AFP/TTXVN

TSMC pledged to restore operations. TSMC admitted that a small amount of equipment at some facilities was damaged after the earthquake, partially affecting the company’s operations, but there was no damage related to important equipment.

TSMC produces about 90% of the world’s most advanced semiconductor chips. They are used by tech giants including Apple, Qualcomm, Nvidia and AMD. They are also essential to the growing artificial intelligence industry.

TSMC has already strengthened earthquake prevention after the 7.6 magnitude earthquake that killed nearly 2,400 people in 1999. As of the end of April 3, TSMC announced that more than 70% of the equipment in their factory was recovered within 10 hours after the earthquake. In addition, TSMC said the affected facilities restored production throughout the night of April 3. However, even a shutdown of chip production for just a few hours can take weeks to recover.

Nvidia, a leading designer of GPUs (chips for AI applications), announced on April 3 that after consulting with manufacturing partners, the group predicts that the Taiwan earthquake will not cause damage. affect supply. Several other technology and semiconductor manufacturers such as United Microelectronics Corporation, Micron and Foxconn said on April 3 that they were assessing the potential impact of the earthquake on their Taiwan facilities but expected has little negative impact.

The race to diversify chip production

Although the April 3 earthquake does not appear to have a lasting impact on the semiconductor supply chain, it also reflects the risks of having a large amount of the world’s microchip production concentrated in one location. Chipmakers and governments in many countries, including the US, have invested billions of dollars in recent years in efforts to diversify chip production. However, many experts worry that this process is not happening fast enough.

In 2022, the US President signed the Science and CHIPS Act to create conditions for spending 200 billion USD over the next 5 years to invest to help the US take the leading position in semiconductor production. In recent years, TSMC also announced plans to build new semiconductor manufacturing factories in Japan, Germany and the US. However, TSMC’s second factory plan in Arizona has been delayed many times.

Experts say that is a sign that the process of diversifying the chip supply chain has not kept pace to prevent risks in Taiwan. Companies or governments must be willing and able to invest billions of dollars to build facilities and a skilled workforce.

Professor Bader said: “I think we are in a critical period over the next few years, until there is a location for a large semiconductor factory like TSMC’s, in a less geographically hot area. more political. We’re really in a challenging arena for a few more years as we wait for that to happen.”