Source: Broker China Author: Chen Ming
The earthquake in Taiwan, China raised industry concerns about chip supply!
According to the latest statistics from the Taiwan Disaster Response Center, the strong earthquake in Hualien, Taiwan on April 3 caused 9 deaths, 1,050 injuries, and 93 people stranded. The 93 stranded people were 5 employees at the Jingying Hotel, 24 visitors to Jiuqu Cave, and 64 people at the Peace Mine. Earlier, on the morning of the 3rd, a 7.3 magnitude earthquake occurred in the waters off Hualien County in Taiwan, and production and life in many parts of Taiwan were affected to varying degrees. According to statistics from the Taiwan Meteorological Department, as of 10:37 p.m. on the 3rd, there had been 216 earthquakes with the epicenter in Hualien County and off Hualien's coast after the main earthquake.
Taiwan, China is the world's largest wafer production base. According to statistics from Jibang Consulting, Taiwan will account for about 46% of global foundry production capacity in 2023. Currently, what the industry is most concerned about is whether the global chip supply will be blocked, and will the chip shortage in 2021 be repeated?
Also, according to media reports, the earthquake caused some of TSMC's chip production lines to stop, which seriously affected the manufacturing of Apple's 3nm chips, and may affect the release schedule and supply of new products that Apple is about to launch. Meanwhile, Apple has another piece of breaking news. On the morning of the 4th, Beijing time, some users reported that the Apple App Store had malfunctioned, showing “Unable to connect to the App Store”. Currently, Apple has not given any specific instructions. In addition to the App Store, Apple Arcade, Apple Books, Apple Fitness+, Apple Music, Apple Sports, and Apple TV+ have all been interrupted. Apple said it is investigating app store downtime issues on iOS and macOS devices.
Giants such as TSMC and Nvidia all had the latest responses to the effects of the earthquake. Let's take a look at the detailed report!
TSMC responds
According to information, the TSMC plant design is mainly grade 7 seismic resistant. On April 3, Taiwanese media mentioned that after the 7.3 magnitude earthquake, in order to ensure the safety of personnel, TSMC has evacuated some factory areas according to the company's internal procedures. Details are yet to be confirmed. According to the above media reports, some quartz pipes in the TSMC plant are currently broken and the online wafers are partially damaged, and some of the machines have been suspended for shutdown inspections to avoid deviation. According to current estimates, the number of working hours will be affected within 6 hours, and the impact on TSMC's second-quarter financial estimates is about 60 million US dollars. The overall impact is limited.
After the earthquake, Bloomberg reported that some TSMC chip production lines were shut down due to the earthquake, which seriously affected the manufacture of Apple's 3nm chips. According to the media, Apple's upcoming 3nm chip is critical to the launch of new products and is facing major challenges due to this interruption, which may affect the release schedule and supply restrictions.
According to reports, industry insiders familiar with TSMC's operations revealed that the Tainan N3 fab factory suffered structural damage, and production was stopped due to broken beams and columns. As a result, production work came to a complete standstill, EUV lithography machines for processes below 7nm have stopped operating, and R&D laboratories have also been severely damaged, such as cracks in walls. Another fab factory in Hsinchu also experienced pipeline rupture and extensive damage, and was forced to stop production. Sources pointed out that some of TSMC's high-end chips, such as the A17 Bionic chip in the Apple iPhone 15 Pro series, require several weeks to complete production in a stable vacuum environment, so even if the earthquake did not cause direct damage, it would cause some chips already in production to be indirectly scrapped.
Regarding the impact of the earthquake, TSMC responded on April 3, saying, “Several sensitive earthquakes occurred in Taiwan in the early morning of the 3rd. The industrial safety system is normal. To ensure personnel safety, relevant preventive measures have been initiated in accordance with the company's internal procedures. Some factory areas have been evacuated. Currently, all personnel are safe and have begun to return to work one after another. Details are yet to be confirmed. Also, the condition inspection of TSMC's construction site was initially normal. Due to safety considerations, it has been decided to stop construction at construction sites all over Taiwan on the 3rd and wait until the inspection is carried out before construction.”
Also, in response to reports that the earthquake affected TSMC's second fiscal quarter of about 60 million dollars, TSMC responded that the news was “not released by TSMC.”
Meanwhile, on the evening of April 3, TSMC made an updated assessment of the impact of the earthquake. The company said that although a small number of equipment in some factories were damaged and affected production on some production lines, none of the main machines, including any extreme ultraviolet (EUV) lithography equipment, were damaged. The company also said that within 10 hours of the earthquake, the recovery rate of fab equipment had exceeded 70%, and the recovery rate of newly built fabs (such as the 18th Wafer Factory) had already exceeded 80%. TSMC is currently maintaining close communication with customers and will continue to closely monitor and directly communicate relevant impacts with customers in due course.
Other semiconductor manufacturers also responded
Other semiconductor manufacturers also responded to the effects of the earthquake. The wafer foundry UMC said that the earthquake had no significant impact on the company's operations. All factory personnel were safe, automatic safety mechanisms were activated at Zhuke's plants and Nanke's 12A plant. Subwafers in production were affected, and production and shipment are now returning to normal operation, with no significant impact on the company's financial operations.
Lianhua Electronics responded that the company has suspended the operation of machinery and equipment at some factories and evacuated some facilities in central Hsinchu and Tainan.
LSMC said that the exact impact of the evacuation of personnel in the factory area, safety of personnel, and preventive shutdown of some machines is still under statistics. Earlier, LSMC said that there are currently no injuries or production line interruptions, but in the future, it is necessary to confirm whether the quartz furnace tubes and machine equipment are damaged.
In terms of sealing and testing plants, including Sun Moon Light, Licheng, and Jingyuan Electric, all responded. After the earthquake, the company carried out an emergency evacuation. The personnel were safe, the production line was not interrupted, production equipment was not damaged, and operations remained normal.
Panel Factory Group said that the safety of factory personnel was confirmed in accordance with the standard procedures as soon as possible. Personnel were evacuated in some factory areas. Currently, personnel safety was carried out; some machines in the factory area started protective automatic shutdown, and system inspections were being carried out, which had little impact on the operation of the factory area.
In terms of storage, the memory manufacturer Huabang Electric said that currently all personnel are safe, factory facilities are operating normally, and the actual impact is being assessed. Storage manufacturer Nanya Technology said that personnel confirmed safety, some machines were stopped preventively, and safety inspections are currently being carried out. Micron said the company is evaluating business operations and supply chain, and all employees are safe.
Nvidia speaks
In response to the impact of the earthquake, global AI leader Nvidia also recently responded. Nvidia said it had quickly reached out to its main partner TSMC after the earthquake, and after evaluation, it said it did not expect the earthquake to disrupt its supply in any way.
However, in the secondary market, Nvidia's stock price appears to have been affected somewhat. On Wednesday local time, the Dow fell slightly by 0.11%, and the Nasdaq, which mainly focuses on technology stocks, rose 0.23%. Nvidia significantly outperformed the market index. The company's stock price fell 0.55% on the same day to 889.64 US dollars. The latest market value was 2.22 trillion US dollars.
In response to the impact of the earthquake on the semiconductor industry chain, the global market research agency TrendForce Jibang Consulting investigated the damage and operation conditions of various factories on April 3 and pointed out that the DRAM (dynamic random access memory) industry was mostly concentrated in northern and central Taiwan, while the Foundry (foundry) industry was in the three regions of North, Central and South. The magnitude of the earthquake in the northern Linkou region was between magnitude 4 and 5 on the morning of the 3rd. The earthquake in other regions was about magnitude 4. Various factories have been shut down and inspected one after another. Although the inspection has not yet been completed, no major aircraft damage has been found at any plant so far.
Jibang Consulting pointed out that production line fragments and furnace tube damage are all in the statistics. It is estimated that manufacturers will be able to recover production capacity by rushing to work later, and basically no major disasters have occurred. Also, regarding the AI supply situation that the market is concerned about recently, since the 4nm process used in Nvidia chips is all produced by TSMC Nanke, although the factory's personnel have not been evacuated, some machines need to be shut down for inspection. Jibang Consulting estimates that operations can resume as soon as possible after adjustments, and the impact is manageable.
In terms of memory, Jibang Consulting said that since Micron's DRAM production capacity is mainly concentrated in Taiwan, the company took the lead in stopping DRAM quotes and restarted contract price negotiations for the second quarter of this year after evaluating losses after the disaster. In addition to this, Samsung and SK Hynix also followed suit and stopped the offer, hoping to wait and see the market before acting. Although Micron and South Asia Technology were shut down due to the earthquake, spot prices did not fluctuate drastically on the 3rd due to the fact that spot supplies are still sufficient.
edit/lambor