Taiwan Earthquake Displays Vulnerability of Chip Giant TSMC

• The worst earthquake Taiwan has seen in 25 years has disrupted operations at Taiwan Semiconductor Manufacturing.
• The disaster shows the vulnerability of TSMC, the world’s leading chipmaker, to natural or geopolitical events.
• TSMC is diversifying with new factories in Arizona, Japan and Germany to mitigate future disruptions.

Taiwan experienced its worst earthquake in 25 years on Wednesday morning, disrupting operations at companies including Taiwan Semiconductor Manufacturing, or TSMC.

TSMC, based in the Taiwanese city of Hsinchu, told Business Insider that some of its microchip manufacturing plants — were evacuated as a precaution, but that all its personnel were safe.

Those who were evacuated also began returning to work on Wednesday afternoon, the spokesperson said. However, work on some sites has been suspended and will only resume after inspections.

“The company is currently confirming details of the impact,” the TSMC spokesperson said. They added that initial inspections show construction sites are “normal.”

The event highlights the vulnerability of the global microchip supply chain and TSMC, one of the world’s largest chipmakers.

After all, TSMC isn’t just any chipmaker. It is the world’s largest chipmaker and, by some estimates, the producer of 90% of the world’s most advanced processor chips.

Taiwan is also home to small chip producers, so the island plays a major role in supplying semiconductors to companies around the world.

While a large earthquake can disrupt TSMC, a more devastating event – ​​such as a Chinese invasion of Taiwan, which Beijing claims as its own – would be far more damaging to already strained global supply chains.

US GDP could suffer a 6.7% drop in the first year of the conflict if Washington were to become embroiled in a war between China and Taiwan, according to a report. Bloomberg Economics analysis. In the event of a Chinese blockade of the island, the United States could see its GDP cut by 3.3% in the first year, Bloomberg estimated.

In total, a war against Taiwan could have an impact on the global economy to the tune of $10 trillion, or around 10% of global GDP, according to Bloomberg forecasts.

Certainly, TSMC is diversifying its production with a second factory in Arizona and new factories to come in Japan and Germany. But the facilities will take time to be commissioned.

The United States is also taking steps to boost chip manufacturing at home, with the CHIPS Act, which provides $52 billion in grants for production, research and workforce development.

Shares of TSMC on the Taiwan Stock Exchange closed down 1.3% on Wednesday.