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The powerful earthquake in Taiwan earlier this week has not only taken a human toll, but also threatens to have economic consequences. TSMC, the world's largest chip manufacturer, had to shut down its production for some time due to the earthquake. This threatens production delays for companies such as Apple and Nvidia, which depend on TSMC's chips.

Context: The east coast of Taiwan was hit Wednesday morning by an earthquake with a magnitude of 7.4 on the Richter scale. That claimed the lives of at least nine people, while some 900 others were injured. Several people are still trapped in collapsed tunnels.

The news: The earthquake forced Taiwan Semiconductor Manufacturing Company (TSMC) to halt production at several locations. A spokesperson for the company reported to Business Insider that quite a few factories were evacuated for safety reasons.

  • TSMC personnel were reportedly never in danger, but production had to be shut down for some time.

Consequences

The chipmaker revealed to Bloomberg that critical equipment was not hit. As a result, a huge financial disaster was avoided. Taiwan-based TSMC supplies 90 percent of the world's advanced chips. So major problems can have tolerable consequences. There is still a worldwide shortage of chips, making their market very fragile.

  • Yet briefly halting production can still have consequences. Some high-end chips must spend weeks 24/7 in a vacuum state to be flawlessly produced. So the shutdown may have caused some of the high-end chips in production to be lost.
  • Apple counts on those advanced chips to power its iPhone, iPad and MacBooks. Nvidia, in turn, uses them to make their coveted GPUs that are very popular with AI.
  • There is little chance that these customers will look for alternative suppliers in the event of delays. Indeed, those possible alternatives to TSMC are at least 50 percent clear. So in case of problems, they will have no choice but to accept the delay.

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