The Blubber

Taiwan Semiconductor Manufacturing, $TSM, evacuated factory areas after a major earthquake rocked its home island, endangering production at the world’s largest maker of advanced chips.

Taiwan Semiconductor Manufacturing Co., the world’s largest producer of advanced chips, temporarily halted some chipmaking equipment and evacuated employees following the strongest earthquake to hit the island in 25 years.

TSMC, a key supplier to Apple Inc. and Nvidia Corp., relocated staff from certain areas and is currently evaluating the impact of the 7.4-magnitude quake off the east coast. Another local chipmaker, United Microelectronics Corp., also stopped machinery at some facilities and evacuated parts of its Hsinchu and Tainan hubs, according to a statement.

Taiwanese companies, including TSMC and ASE Technology Holding Co., manufacture and assemble the majority of semiconductors used in products such as iPhones and cars. Their factories are sensitive to even minor tremors, which can ruin entire batches of precision-made chips. TSMC shares dropped around 1.5% in early trading, while UMC saw a less than 1% decline.

“TSMC’s safety systems are functioning normally. To ensure personnel safety, some fabs were evacuated according to company procedures,” TSMC said in a statement. “We are currently assessing the impact.”

Taiwan is prone to earthquakes due to its location near the convergence of two tectonic plates. Despite this, the island is responsible for an estimated 80% to 90% of the highest-end chips used in advanced applications like smartphones and AI.

Industry leaders and government officials have long highlighted the risks of concentrating advanced semiconductor production on an island that, aside from natural disasters, is a potential military flashpoint. This vulnerability was underscored during the Covid era, which exacerbated a global shortage of these critical components.

Mindful of Taiwan's vulnerability to mainland China, which views the island as a renegade province, American officials have urged US and Taiwanese companies, including TSMC, to diversify geographically. However, TSMC's expansion projects in Japan and the US will take time to reach full capacity, and major American companies like Micron Technology Inc. still maintain significant operations on the island.