Taiwan earthquake briefly halts chip factories that power the global economy

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A 7.4-magnitude earthquake struck Taiwan off the island's east coast on Wednesday and temporarily disrupted production at semiconductor factories that produce chips major Silicon Valley companies rely on for products and services. / AP

The powerful earthquake that struck Taiwan on Wednesday temporarily paused chipmaking at factories along the island's west coast, briefly putting the tech industry on edge.

And that's because of just how dependent the global economy is on semiconductor chips produced in Taiwan.

An estimated 92% of the world's most sophisticated chips are manufactured by one company: the Taiwan Semiconductor Manufacturing Co.

The quake, with a magnitude of 7.4, struck off the east coast of the island on Wednesday. TSMC's factories, known as chip fabs, are arrayed along the western coast of the Taiwan Strait, about 90 miles away from the earthquake's epicenter.

TSMC said in a statement that some of its fabs were briefly evacuated on Wednesday for inspections but workers later returned. They are expected to resume chip production throughout the night, according to TSMC.

The company said initial inspections show that there are no major issues at any of the chip sites.

"A small number of tools were damaged at certain facilities, partially impacting their operations. However, there is no damage to our critical tools," a TSMC spokesperson wrote in a statement to NPR.

TSMC supplies advanced chips for everything from dishwaters to fighter jets.

Smartphones, laptops and generative AI tools like ChatGPT are powered by TSMC chips. Thus, companies like Apple, Huawei, Nvidia, Tesla, OpenAI and others depend on the chipmaker.

Analysts said even though the disruption was minimal, even a short disturbance to chip production in Taiwan could delay shipments and cost many millions of dollars. The exact financial toll of Wednesday's quake is still being assessed.

While the worst was far from realized for the tech industry, experts who study the chip sector in Taiwan have long been saying that a natural disaster on the island could leave the global economy in ruins.

"Nearly a third of the new computing power we rely on each year is fabricated in Taiwan. This has made TSMC one of the most valuable companies in the world," historian Chris Miller wrote in the book "Chip War," published in 2022.

"After a disaster in Taiwan, the total costs of the semiconductor shortage would be measured in the trillions. Losing a third of our production of computing power each year could well be more costly than the COVID pandemic and its economically disastrous lockdown," Miller wrote.