Taiwan quake disrupts chip giant TSMC, hints at global supply fragility

The strongest earthquake in 25 years in Taiwan has affected the operations of Taiwan Semiconductor Manufacturing (TSMC), the leader among chip manufacturers worldwide. Some factories suspended their activities.

A strong earthquake magnitude of 7.2 hit Taiwan during the early hours from Tuesday to Wednesday Greenwich Time. A series of aftershocks followed it. Authorities in Japan, the Philippines, and Taiwan issued tsunami warnings.

The head of the Seismological Centre in Taipei emphasized that this was the strongest earthquake in Taiwan since 1999.

As reported by American Business Insider, due to the earthquake, personnel in the city of Xinzhu, a hub for the modern technology industry, were evacuated. Moreover, some of the microprocessor-producing factories halted operations until inspections were completed and it was safe to resume work.

"The company is currently assessing the impact," said a TSMC spokesperson. He added that initial inspections indicate the facilities are "normal".

"This event underscores the vulnerability of the global microprocessor supply chain and TSMC's critical role as one of the world's leading chip manufacturers," emphasizes BI. TSMC is responsible for producing 90 per cent of advanced processors.

Meanwhile, Taiwan "also hosts smaller chip manufacturers, playing a significant role in the global semiconductor supply chain."

The portal speculates how a Chinese invasion of Taiwan would impact the global chip market. Beijing views the island as a separatist province that should be re-integrated into the Middle Kingdom.

If an earthquake can disrupt TSMC's operations, a more catastrophic event - such as a Chinese invasion to which Beijing lays claim - could severely damage the already vulnerable global supply chains, BI believes.

If a conflict broke out in Taiwan involving the United States, the U.S. GDP could shrink by about 6.7 percent. Conversely, Beijing's blockade of the island would significantly impact the U.S. economy, with a GDP decrease of more than 3 per cent—estimated Bloomberg.

A conflict over Taiwan could cost the global economy 10 trillion dollars. The American Centre for Strategic and International Studies (CSIS) ran a simulation of a Chinese attack predicted for 2026. This date is not chosen at random. According to the CIA, Chinese leader Xi Jinping aims for the Chinese military to be prepared for the takeover of Taiwan by 2027.

In the event of an invasion, China would encounter severe economic challenges, in the view of CSIS. Nonetheless, Taiwan holds significant importance in Beijing's international policy, with PRC chairman Xi Jinping frequently discussing the "unification of China."