They say "the world is cruel place" and the latest example of same is that instead of supplying supportive aid to people who have been affected in the region, the world is more concerned for solution to the reliance on Taiwan for semiconductor manufacturing. As Taiwan is a region prone to seismic activity, the disruption could potentially lead to delays and price increases for electronic components, which would affect a wide range of products from smartphones to cars.
The earthquake halted some chipmaking operations. Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest maker of advanced chips, was among the companies that had to evacuate staff and stop machinery as a precaution.
Moreover, the earthquake could have a considerable impact on the global technology supply chain. The global tech supply chain is already feeling the effects, with predictions of shortages and price hikes for key components. This incident serves as a reminder of the fragility of the global supply chain and the importance of geographic diversification in manufacturing.
Besides TSMC, Taiwan also houses United Microelectronics Corp. (UMC) playing pivotal roles and is a significant supplier to the automotive industry. The earthquake prompted both TSMC and UMC to halt some production units and evacuate plants.
Given that high-end chips require continuous production processes that can span several weeks, any interruption could result in the loss of in-progress chip batches. This disruption could potentially lead to shortages or increased prices for electronic components globally, affecting everything from consumer electronics to automotive industries.
Moreover, the concentration of such a significant portion of the world's semiconductor production in a region prone to natural disasters highlights the vulnerability of the global supply chain and underscores the need for diversification and robust contingency planning.
Need for Alternative Semiconductor Hubs
There are several emerging alternative hubs for semiconductor manufacturing. India, for instance, is making significant strides in this area. The country is not only establishing semiconductor foundries but is also aiming to bring semiconductor wafer fab equipment (WFE) manufacturing in-house. This move is considered a masterstroke based on the geopolitics and geo-economics of semiconductors.Additionally, India's government has launched initiatives like the India Semiconductor Mission and production-linked incentive (PLI) schemes to attract investments in chip manufacturing, which could make India a reliable source of semiconductors.
Japan is also positioning itself as a potential hub, with plans to develop semiconductor industries in regions like Kyushu, Tohoku, and Hokkaido. However, Japan too is an earthquake prone country. This island country sits at the junction of four tectonic plates, making it a hotspot for seismic activity and thus Japan experiences frequent earthquakes, including some of the most powerful ever recorded.
These efforts reflect a global trend towards diversifying the semiconductor supply chain and reducing reliance on traditional manufacturing powerhouses like Taiwan and China.
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