The 7.4-magnitude earthquake that shook Taiwan on Wednesday morning likely will result in minimal disruption to production at the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing, better known as TSMC. But the disaster renews concerns about having too much leading-edge semiconductor manufacturing located in one region.
TSMC said it halted operations after the quake but planned to resume production overnight into Thursday morning.
"There is no damage to our critical tools including all of our extreme ultraviolet lithography tools," the company 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, it added.
TSMC makes advanced processors for such major customers as AMD, Apple, Broadcom, Nvidia and Qualcomm.
Taiwan Quake Raises Issues
Government leaders and industry officials have warned about the dangers of locating so much of the world's cutting-edge chip production on Taiwan. In addition to occasional earthquakes, Taiwan is a potential military flashpoint. Mainland China considers the island a renegade province.
In response to calls for geographical diversification, TSMC is building new plants in the U.S. and Japan.
"This earthquake only reinforces the importance and need for the global semi production base and supply chain to diversify geographically," Jordan Klein, managing director for tech, media and telecom sector trading at Mizuho Securities, said in a client note.
There is "a ton of risk having so much concentration in Taiwan," he said. "Governments will see this risk and continue to award grants and tax credits to attract more semi production inside their borders."
'Reminder To Investors'
CFRA Research analyst Angelo Zino concurred.
"The earthquake should serve as a reminder to investors of the risks associated with having so much foundry exposure coming from one region," Zino said in a report. He noted that Taiwan accounts for nearly half of all semiconductor production and 80% to 90% of advanced technology chips.
The Taiwan quake could boost pricing for memory chips and processors in the short term, analysts said.
Chip Stocks Rise On News
Other chipmakers with factories in Taiwan also paused operations after the temblor. They include Micron Technology and United Microelectronics.
In a news release, Micron said it is evaluating the impact of the quake to its operations and supply chain.
In afternoon trades on the stock market today, TSMC stock rose 1.4% to 141.98. Micron stock advanced 4% to 127.63. UMC stock increased 0.3% to 8.14.
The April 3 quake was the biggest in Taiwan in 25 years. The epicenter was in eastern Taiwan while most chip fabs are in north or central Taiwan.
TSMC said the maximum magnitude of the Taiwan quake at its Hsinchu, Longtan and Zhunan science parks was 5. It reached magnitude 4 at the Taichung and Tainan science parks, TSMC said.
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