In this special Supply Chain Matters supply network risk advisory, we highlight the initial implications of today’s major earthquake that has impacted the island of Taiwan.

Major Earthquake

Senior business, procurement, information technology or supply chain executives with the responsibility for the assessment and mitigation of business related risks can often contemplate various impactful risk events. They can be events that are geopolitical, industry or natural disaster in scope.

For businesses associated with high tech products or a dependency on the reliable supply of advanced semiconductor devices, one of those scenarios was likely a major earthquake impacting the island of Taiwan, the global hub of advanced semiconductor design and fabrication.

Today, such a scenario has again occurred, given the ongoing reports of a 7.4 magnitude earthquake that has impacted Taiwan.

Published reports indicate that the severity of the tremor has led to the collapse of up to 26 buildings, four reported deaths and the injury of 57 people thus far. As is the case with significant natural disasters, much is still unknown and will remain so until rescue teams can assess the conditions and tend to the human as well as physical toll.

Our thoughts are with the victims, and their families.

Initial Indications

According to a published report from Bloomberg, “Taiwan’s biggest earthquake in 25 years has disrupted production at the island’s semiconductor companies, raising the possibility of fallout for the technology industry and perhaps the global economy.”

According to the U.S. Geological Survey, the earthquake was centered about 11 miles south of the city of Hualien and occurred just before 8 a.m. local time with a preliminary magnitude of 7.4. Thus far, aftershocks of magnitude 6.5 and 5.7 have been reported.

Reports indicate that TSMC, the global leader in advanced semiconductor chip fabrication was forced to evacuate some of its facilities along with halting production. According to reporting by The Wall Street Journal (Paid subscription), some TSMC production technicians have returned to work.  Reportedly, United Microelectronics Corp,  Powerchip Semiconductor Manufacturing Corp. (PSMC), and flat panel maker Innolux Corp. halted some of their production lines in the Hsinchu Science Park as a preventive step in response to the quake.

A further consideration in the days ahead will be the occurrence and magnitude of aftershocks. The state of this island’s public utility infrastructure including supply of electricity, water, transportation and other services so important to island residents and production facilities will be the concern of many.

Need for Assessments

Since Supply Chain Matters inception, we have highlighted previous occurrences of major earthquakes occurring in Taiwan, including a 6.4 magnitude event that occurred in early 2018 as well as a 6.3 magnitude event that occurred in November 2013. In each of these prior events, the island’s fab facilities incurred temporary production suspensions, later to return.

The difference this time is the sheer magnitude of today’s quake.

In the litany of natural disasters or health emergencies that have impacted Taiwan, firms have managed to successfully mitigate the effects of prior severe earthquakes, floods, typhoons and a global pandemic.  But, as we pointed out then, and especially now, every disaster brings its own unique disruptive implications.

Over the coming days and weeks these same business and supply network risk assessment teams will be evaluating the ongoing situation and its implications for semiconductor short and longer-term supply needs. While business media will report on the major risks to the supply of advanced artificial intelligence chips or on other high tech industry implications, each business must make its own assessment.

Today’s tragic event is yet another reminder of the importance for businesses fostering a cohesive supply network resiliency strategy for key materials.

 

Bob Ferrari

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