Taiwan quake to hit some chip output, cause Asia supply chain disruptions, analysts say

Taiwan's biggest earthquake since 1999 is likely to cause some disruption across Asia's semiconductor supply chain, analysts say, after chipmakers from TSMC to UMC halted some operations to inspect facilities and relocate employees.

The powerful 7.2-magnitude earthquake struck Taiwan's eastern coast near Hualien County on Wednesday morning, killing nine people and injuring 800.

Taiwan plays an outsized role in the global semiconductor supply chain as it is home to the world's largest chipmaker Taiwan Semiconductor Manufacturing Co (TSMC), which supplies chips to the likes of Apple and Nvidia, and smaller chipmakers including UMC, Vanguard International Semiconductor, and Powerchip Semiconductor Manufacturing.

While most of their facilities are not close to the earthquake's epicenter, many of these firms said they had evacuated some of their manufacturing plants and shut down some facilities for inspections.

"To ensure the safety of personnel, some fabs were evacuated according to company procedure," TMSC said in a statement, adding later that the employees had begun to return to work.

TSMC, whose facilities in Hsinchu, Tainan and Taichung have experienced varying degrees of disruptions, may have to delay some shipments and increase wafer input to compensate for this, consultancy Isaiah Research said in a note.

"Mitigating the impacts of the earthquake necessitates careful measures and time to restore production and uphold quality standards, presenting additional implications and obstacles," they said.

TSMC's Tainan operations for advanced process nodes, such as 4/5nm and 3nm, were temporarily suspended, they said. In addition, the extreme ultraviolet (EUV) lithography equipment crucial for these advanced nodes was halted at the site for a period of 8-to-15 hours.

Barclays analysts said some highly sophisticated semiconductor fabs need to operate seamlessly 24/7 in a vacuum state for several weeks and the halts would disrupt the process, pushing up pricing pressure in the sector.

This could spillover to cause a 'short-term hiccup' to electronics manufacturing in economies focused on upstream products, such as Japan and Korea, as well as economies focused on downstream products, such as China and Vietnam, they said However, the report noted that lower inventory levels among customers could allow Taiwanese and Korean chipmakers to raise prices.