Taiwanese semiconductor giant TSMC restarts operations after earthquake, easing concerns of chip supply disruption

Taiwan Semiconductor Manufacturing Co (TSMC) resumed operations shortly after the island was rocked by a deadly 7.4 magnitude earthquake on Wednesday, easing industry concerns about a potential disruption in the supply of advanced chips.

The world's largest independent contract chip manufacturer, which supplies 90 per cent of the world's most advanced semiconductors to technology giants like Apple and Nvidia, restarted operations within 10 hours after work was suspended because of the worst earthquake to hit Taiwan in 25 years. There were at least nine fatalities and more than 1,000 injured during the earthquake.

TSMC said in a statement to the Taiwan stock exchange late on Wednesday that there was no significant damage to its facilities in Hsinchu Science Park, a 1,400-hectare area where other major Taiwanese chip makers like MediaTek and United Microelectronics Corp also have factories.

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Only "a small number of tools were damaged at certain facilities", TSMC said. The firm added that there was no damage to certain critical chip-making equipment, including all of its extreme ultraviolet lithography tools.

Following a brief suspension of work, TSMC said 70 per cent of its chip-manufacturing equipment had been "recovered" for production at its fabrication facilities within 10 hours of the earthquake. New facilities, such as its Fab 18, achieved a recovery rate of more than 80 per cent.

Taiwanese media initially reported that TSMC had estimated the impact of earthquake-related disruption to the firm's second-quarter earnings to reach US$60 million. But the company's public comments have signalled minimal impact to its operations.

TSMC did not respond to a request for comment on Thursday.

Widespread concern about the state of Taiwan's semiconductor manufacturing industry after the earthquake shows the pivotal role that TSMC and other major chip makers in the island play in the global technology supply chain. The island produces 60 per cent of the world's semiconductors.

Analysts at Barclays initially warned that the production of certain chips in Taiwan could take weeks to recover, according to a note published on Wednesday.

"Some of the high-end chips need 24/7 seamless operations in vacuum state for a few weeks," the Barclays report said. "[Halting operations] in Taiwan's northern industrial area could mean some high-end chips in production may be spoiled."

Other analysts expected the earthquake's impact on Taiwan's chip production would be minimal.

The dynamic random access memory industry, primarily located in the northern and central parts of Taiwan, and the [chip] foundry sector - spread across the north, central and southern regions of Taiwan - appear to have sustained minimal damage, according to a note published on Wednesday by Taiwan-based integrated circuit research firm TrendForce.

"Manufacturers will manage to restore their production capacities by ramping up operations," the TrendForce report said.

TSMC's New York-listed shares closed up 1.27 per cent at US$142 on Wednesday.

In January, TSMC reported that its fourth-quarter revenue beat estimates of a decline, as demand from artificial intelligence players helped offset sluggish smartphone and laptop chip sales. It reported December quarter sales of NT$625.5 billion (US$19.5 billion).

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