Taiwan, renowned for its role in the global semiconductor supply chain, faces disruption following a powerful earthquake striking its eastern coast near Hualien County.
Taiwan’s share of global semiconductor foundry capacity stood at about 46 percent as of 2023, followed by China (26 percent), South Korea (12 percent), the U.S. (6 percent), and Japan (2 percent), according to a TrendForce report earlier.
The earthquake, measuring 7.2 on the Richter scale, resulted in the loss of nine lives and left 800 injured, Reuters news report said. While the affected chipmakers’ facilities were not directly at the epicenter, precautionary measures such as evacuations and facility shutdowns were undertaken.
TSMC, a leader in the semiconductor industry, indicated varying degrees of disruptions across its facilities in Hsinchu, Tainan, and Taichung. Particularly affected were its advanced process nodes operations in Tainan, including 4/5nm and 3nm, with temporary suspensions reported. Furthermore, the interruption of extreme ultraviolet (EUV) lithography equipment crucial for advanced nodes added to the operational challenges.
Micron Technology in a news statement to TelecomLead.com confirmed the safety of its team members post-earthquake and initiated assessments of operational and supply chain impacts, with further communication expected after evaluation completion.
Analysts from Barclays highlighted the intricate nature of semiconductor fabrication, emphasizing the necessity for continuous, uninterrupted operation, especially in highly sophisticated fabs. The disruptions incurred may lead to pricing pressures within the sector, potentially affecting electronics manufacturing in economies both upstream, such as Japan and Korea, and downstream, such as China and Vietnam.
Despite the challenges, the report suggested a potential silver lining in the form of lower inventory levels among customers, which could empower Taiwanese and Korean chipmakers to adjust prices.
DRAM and foundry industries
Taiwan’s dynamic tech sectors, including the DRAM and foundry industries, have emerged relatively unscathed in the aftermath of a recent earthquake, primarily centered in the northern part of the island.
The tremors, ranging from intensity scale 4 to 5 in the northern Linkou area and around intensity scale 4 in other regions, prompted manufacturers to initiate sequential shutdowns for inspections. However, reports indicate that initial damage assessments reveal minimal impact on equipment.
According to report from TrendForce, a leading market research firm, evaluations are underway to determine the extent of damage to production line fragments and furnace tubes. Nevertheless, the absence of significant disasters has bolstered confidence that manufacturers will swiftly restore production capacities by ramping up operations.
Of particular interest is the status of NVIDIA chips, crucial components for AI applications, which utilize the 4nm process manufactured at TSMC’s Southern Taiwan Science Park. While equipment inspections necessitated temporary shutdowns, there were no evacuations of personnel, indicating a relatively stable situation.
Suspending DRAM pricing
Micron, a major player in the DRAM market with production facilities in Taiwan, has taken the lead in suspending DRAM pricing. This move comes as the company reassesses potential post-disaster losses, aiming to restart negotiations for 2Q24 contract prices. Similarly, Samsung and SK Hynix, though without DRAM production in Taiwan, have also paused pricing activities, opting to observe market trends.
Despite the earthquake, the spot market for DRAM and NAND Flash memory had been displaying signs of weak demand in preceding weeks. Consequently, while Micron and Nanya faced temporary shutdowns, the market’s ample supply mitigated significant price fluctuations. Overall, price increases remained minimal, with subdued purchasing enthusiasm.
Looking ahead, TrendForce anticipates a slight short-term increase in DRAM spot prices. However, the sustainability of this trend remains uncertain due to persistently weak demand. DRAM suppliers and module factories have temporarily ceased pricing activities, reflecting a cautious stance amid the earthquake’s aftermath.
TrendForce reveals that all panel fabs at AU Optronics have suspended operations for inspections and repair work. Recovery efforts are now underway. Similarly, Innolux’s fabs have experienced varying impacts, with most facing noticeable disruptions in equipment operations. However, Fab6 managed to escape with only minor equipment effects.
Assessing the aftermath, TrendForce estimates a production impact of at least 1-2 days across affected fabs. Should the earthquake’s effects persist for two days, approximately 1.2 percent of the overall production volume (measured in surface area) is expected to be affected. With disruptions widespread across panel fabs, all display application segments are anticipated to witness reduced production volumes to some degree.
TV panel
Despite the strong demand for TV panels, TrendForce forecasts that capacity utilization rates for AU Optronics and Innolux will rise to 85 percent and 83 percent, respectively, in April. However, the recent earthquake may prompt further downward revisions.
In light of existing demand dynamics, fabs primarily manufacturing TV panels are already operating at near full capacity. Consequently, the earthquake is likely to impact TV panel shipments. Previously projected TV panel price increases into April face uncertainty, especially as demand for small to mid-sized TV panels begins to weaken. TrendForce will closely monitor whether the earthquake’s impact extends into May and acknowledges a diminishing influence of Taiwan-based panel makers on TV panel prices, barring prolonged fab suspensions.
As for the IT panel market, there’s a recent surge in stock-up demand for monitor panels. However, surplus production capacity in some fabs raises questions about meeting this demand post-earthquake. Notably, monitor panel prices have rebounded significantly, prompting ongoing scrutiny by TrendForce to gauge the interplay between demand, prices, and post-earthquake production capacities.
Demand for NB (Notebook) panels remains subdued currently, with panel makers possessing sufficient inventory to manage. Consequently, the earthquake’s impact on NB panel shipments is expected to be minor. However, as demand is anticipated to rise gradually in the second quarter, panel makers eyeing price increases may leverage the earthquake’s effects on production capacity for potential hikes, a trend to watch in the coming months.
Baburajan Kizhakedath