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Factories froze: the best gadgets may be left without chips due to the disaster in Taiwan

Natasha Kumar By Natasha Kumar Apr6,2024

Factories stand still: the best gadgets may be left without chips due to the disaster in Taiwan

Analysts from Barclays believe that many chips can now simply be thrown away, as production processes have been disrupted by a natural disaster.

Chip maker TSMC said the effects of the earthquake in Taiwan could negatively affect its earnings in the second quarter of 2024. The company had to stop many production lines in order not to put employees at risk, but this will lead to significant delays in the supply of processors, writes Asia financial.

Taiwanese semiconductor company TSMC warned that the effects of the 7.2-magnitude earthquake that struck Taiwan on April 3 could hurt its second-quarter earnings by $60 million. This was the preliminary estimate given by Barclays analysts. Also, Taipei-listed shares of TSMC fell 1.3%, but the underlying index largely offset the quake's impact to close 0.6% lower.

TSMC is known to be a major supplier chips for Apple and Nvidia. Now that production has been temporarily suspended as some factories have been evacuated to ensure the safety of staff, a riot has formed. Although some lines have been restored, the temporary outage has disrupted supply chains, which may also have negative consequences for customers.

“Some high-performance chips require an uninterrupted 24/7 vacuum process for several weeks. The production shutdown in Taiwan's northern industrial areas could mean that some high-quality chips in production could be spoiled,” — analysts indicate.

Barclays said that not only TSMC factories were affected by the earthquake, — other microchip manufacturers such as United Microelectronics (UMC), Micron, ASE were also disrupted. Analysts warned that the economic costs could be more severe. They also expect some production restrictions in both Taiwan and the region due to the risks of a repeat earthquake, which could lead to price pressure in the chip manufacturing sector.

Barclays analysts believe that the direct effects of the earthquake will be felt around the east coast of Taiwan and may have an indirect effect on Taiwan's industrial areas. Analyzing data from the US Geological Survey, they concluded that production facilities in northern Taiwan, as well as in Hsinchu and Taichung, but to a lesser extent in Tainan, may have been affected to varying degrees.

If the information that the semiconductor factories in Taoyuan, Hsinchu, and Taichung were significantly damaged, most of the chips produced at the time of the earthquake will be severely defective. They gave the following estimates:

  • This will affect Taiwan's mining and processing production — production losses will increase and component shortages will be felt.
  • Electronic component manufacturers in the region will suffer during the production cycle as it affects remanufacturing.
  • Consumer electronics remanufacturing may see further inventory reductions and supply shortages of high-performance computers and servers will widen.
  • >

In such a scenario, there would be a short-term disruption in electronics production in manufacturing-oriented economies such as Taiwan, Japan, and Korea, and in manufacturing-oriented economies such as China, Vietnam, Thailand, Malaysia, Taiwan and Korea.

“If the reduction in Taiwan's semiconductor production is limited, we believe it will have a small impact on Taiwan's economy, but without significant disruption to regional production or trade,” — experts said.

According to the authorities, as a result of the earthquake that occurred around 8 am on March 3, 2024, 9 people died and more than 800 were injured. Emergency services managed to rescue at least 77 people who were trapped in tunnels and collapsed buildings.

Natasha Kumar

By Natasha Kumar

Natasha Kumar has been a reporter on the news desk since 2018. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining The Times Hub, Natasha Kumar worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my natasha@thetimeshub.in 1-800-268-7116

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