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Taiwan chipmakers suspend some production for inspections

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Halts to disrupt supply chain, analysts say

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Electronics manufacturers may face price pressures

(Writes through with analyst comments and research reports)

By Liam Mo and Brenda Goh

BEIJING, April 3 (Reuters) - Taiwan's biggest earthquake

in at least 25 years is likely to tighten supply of tech

components such as display panels and semiconductors, analysts

said, as manufacturers in the global tech powerhouse restore

operations at affected facilities.

The powerful 7.2-magnitude earthquake struck Taiwan's

eastern coast near Hualien County on Wednesday morning, killing

nine people and injuring more than 1,000.

The island plays an outsized role in the global chip supply

chain as it is home to the world's largest chipmaker, Taiwan

Semiconductor Manufacturing Co ( TSM ), which supplies chips

to Apple ( AAPL ) and Nvidia ( NVDA ).

The country also houses smaller chipmakers, including UMC

, Vanguard International Semiconductor, and

Powerchip Semiconductor Manufacturing.

Manufacturers in Taiwan have been hardening their factories

against earthquakes for decades and many use automatic shutdown

systems to minimise damage to their production and tools,

analysts said.

"For a lot of the tools that go into automatic shutdown,

it can take you no more than 36 or 48 hours to bring them back

up and re-qualify them," said Dan Hutcheson, vice chair at

Canadian research firm TechInsights.

"When you look at the business side of it - will this

affect quarterly revenues? - the odds are it won't. But it's

going to be a real headache for everyone involved to get this

stuff back up and running."

While most of their facilities are not close to the

earthquake's epicenter, many of the firms said they had

evacuated some of their manufacturing plants and shut down some

facilities for inspections.

TSMC said on Wednesday work at its construction sites, which

has been halted, will resume after inspections, while impacted

facilities are expected to restart production throughout the

night.

It said overall tool recovery of its chip fabrication

facilities reached more than 70% within 10 hours of the

earthquake, with new fabs reaching more than 80%.

Nvidia ( NVDA ), whose popular AI chips are manufactured by TSMC,

said it had consulted with its manufacturing partners and the

firm does not expect supply chain disruptions from the

earthquake.

TSMC, whose facilities in Hsinchu, Tainan and Taichung have

experienced varying degrees of disruptions, may have to delay

some shipments and increase wafer input to compensate for this,

consultancy Isaiah Research said in a note.

"Mitigating the impacts of the earthquake necessitates

careful measures and time to restore production and uphold

quality standards, presenting additional implications and

obstacles," they said.

TSMC's Tainan operations for advanced process nodes, such as

4/5nm and 3nm, were temporarily suspended, they said. In

addition, the extreme ultraviolet (EUV) lithography equipment

crucial for these advanced nodes was halted at the site for a

period of 8-to-15 hours.

Barclays analysts said some highly sophisticated

semiconductor fabs need to operate seamlessly 24/7 in a vacuum

state for several weeks and the halts would disrupt the process,

pushing up pricing pressure in the sector.

This could spillover to cause a "short-term hiccup" to

electronics manufacturing in economies focused on upstream

products, such as Japan and Korea, as well as economies focused

on downstream products, such as China and Vietnam, they said.

The report noted that lower inventory levels among customers

could allow Taiwanese and Korean chipmakers to raise prices.

Research firm TrendForce expected shipments of television

panels would also be affected, as manufacturers have already

been operating at near full capacity globally to meet solid

demand, and as the earthquake was likely to tighten supplies.

It said TV panel prices were projected to continue

rising into April, but the longer-term effect of the earthquake

would be limited, unless Taiwanese panel makers are forced to

suspend operations for more than a week.