How an Earthquake could Disrupt Taiwanese Semiconductors

An image of the island of Taiwan made of chips and semiconductors

Last week, Taiwan was struck by a prominent earthquake that left meaningful damages across the island and resulted in the loss of some 9 lives and injuring over a thousand people. In the Richter scale—used to measure the intensity of such phenomena—the earthquake in question scored a 7.4, making it the strongest to hit the region in nearly 25 years.

Earthquakes are not a rare occurrence in Taiwan and, in fact, in the last 20 years, the island has experienced 16 other phenomenons. As a result, Taiwanese citizens, officials, and companies have made meaningful investments in earthquake preparedness strategies and infrastructure.

Magnitude of Earthquakes in Taiwan (Historical)

A bar graph depicting the magnitude of earthquakes in Taiwan

(Data from World Data)

But despite the many mitigation efforts, the earthquake last week was still able to shut down operations across the island. Quite crucially, it forced TSMC—one of Taiwan’s core companies—to immediately stop the manufacture of semiconductors across its 18 factories—commonly referred to as “Fabs.” Thus far, the company has reported that nearly 70% of all its equipment needed to make chips was unaffected by the earthquake and back in operation. At the moment of writing this alert, TSMC had not made any official communications regarding the remaining 30% of its tools.

In recent years, TSMC has become the single largest player in the world of semiconductors, controlling 56% of the entire market. Looking at the market for advanced semiconductors, TSMC controls a whopping 92% of the total. Taiwan as a whole controls a surprising 63% of the entire semidconductor market. As a result, any pause in production could meaningfully disrupt the availability for semiconductors and leave tech supply chains in distress.

Countries by Share of the Semiconductor Industry

A pie chart showing the share of the semiconductor market controlled by Taiwan

(Data from CNBC)

Given Taiwan’s propensity to suffer from earthquakes, it is worth posting the question of how much damage could come from a disruption of this sort. As of 2023, TSMC’s Fabs have the capacity to manufacture some 16 million 12-inch equivalent wafers. While chips can change significantly according to each client’s specifications, this serves as an initial estimate to the company’s capabilities. 

In an ideal scenario, TSMC’s Fabs would be able to produce over 43,800 wafers every day of the year. Losing 30% of the company’s operational capabilities could thus result in losses of 13,150 wafers per day. 

We also know, according to SEMI, that every year, semiconductor companies around the world produce some 12.6 bn sq ft of semiconductor wafers—roughly, 111.5 million 12-inch equivalent wafers as the ones produced by TSMC. That is, a daily production of over 305 thousand wafers. With this in consideration, the current losses by TSMC from the earthquake could account as much as 4.3% of daily semiconductor production worldwide.

This, of course, is just an estimate but it helps us understand just how dangerous it could be for disruptions of this sort to remain a pattern in Taiwan. Moreso considering the island’s long-standing history with earthquakes.

Thus far, TSMC has not provided further information on regaining capabilities in its Taiwanese Fabs. However, it is worth noting that the company reported only minor damages to the machines in question. 

Regardless, the events serve as a sobering reminder of just how much of the tech world relies on a single company in a single island located on top of an earthquake-prone region.