According to the measurement of China Earthquake Networks Center, from 17:08 on April 22 to 3:34 in the morning on April 23, there were 26 earthquakes of magnitude 4.0 and above in Hualien County and the nearby sea area, including 7 earthquakes of magnitude 5.0 and above, and 2 earthquakes of magnitude 6.0 and above. The frequent earthquakes were aftershocks of the 7.3 magnitude earthquake in Hualien County, Taiwan on April 3.
The earthquake on April 3rd has caused damage to some equipment at TSMC, with an estimated loss of NT $3 billion. How will the recent earthquakes affect Taiwan's semiconductor manufacturing industry?
On April 23rd, TSMC replied to First Financial reporters that the earthquakes did not meet external evacuation standards, and the factory and industrial safety systems were normal. Currently, it is not expected to have any impact on operations. Liandian replied to reporters that "there is no impact.".
The first financial reporter also sent emails to semiconductor manufacturers such as TSMC, Huabang Electronics, and World Advanced on the impact of the earthquake, but there has been no response as of the time of publication.
TSMC and Liandian Response
At 2:26 on April 23, a 6.3 magnitude earthquake occurred in the sea area of Hualien County, Taiwan. Although the current highest magnitude is lower than the 7.3 magnitude earthquake on April 3rd, the impact of frequent earthquakes on Taiwan's semiconductor manufacturing industry is still under external attention.
TSMC replied to a reporter from First Financial News that several earthquakes occurred in Taiwan since the early hours of April 23, but none of them met the external evacuation standards. According to TSMC's internal procedures, a small number of personnel in the cleanroom of the factory area were evacuated as soon as possible to ensure personnel safety, and all have now returned to the line. The factory management and work safety system are all normal, and all personnel are safe. Currently, there is no expected impact on operations. Liandian replied that the earthquake had no impact.
Previously, there were reports of earthquake alarms and machine alarms at various technology plants in Zhuke. TSMC evacuated personnel and all on duty personnel rushed to the production line, but there have been no reports of production being affected.
According to the semiconductor data monitoring platform SiliconExpert, TSMC's factory is located on the west side of Taiwan Island. Hualien County, where the recent earthquake occurred, is located along the eastern coast of Taiwan.
The magnitude of the earthquake was lower than that on April 3. Looking back at the impact of the earthquake in Hualien County, Taiwan, on April 3 on semiconductor supply, TSMC announced on the evening of April 18 that the overall impact of the earthquake is expected to reduce the gross profit margin of the company in the second quarter of 2024 by about 50 basis points, mainly due to the reported scrap of wafers and losses related to material loss. Preliminary estimates suggest that in the second quarter of 2024, after deducting insurance claims, the related earthquake losses will be approximately NT $3 billion (equivalent to approximately RMB 669 million).
Several Taiwanese semiconductor companies have also announced the impact of the Hualien earthquake on April 3.
On April 15th, in response to the impact of the Hualien earthquake on April 3rd, TSMC revealed at a press conference that it expected a chip scrap loss of NT $500 million. After the earthquake, the production line will roughly recover to 80% within three days and over 90% within a week, affecting shipments in the second quarter by 5% -8%. According to Xie Zaiju, the general manager of Liji Electric, after evaluation by the factory management system, there is no damage, and the water and power supply are operating well. Only areas such as the yellow light machine and furnace tube area that are more sensitive to earthquakes have a significant impact, and it is estimated that a compensation range of 50% -60% can be obtained.
South Asia Science and Technology announced on April 10th that some equipment in the production plant has crashed and the wafer has been damaged. Normal production has resumed and there is no significant impact on South Asia's technology operations. Huabang Electronics announced on the same day that the earthquake on April 3 had no significant impact on the company's operations and finances. Both the Kaohsiung and Zhongke factories have resumed normal production and operation 100%, and will not affect the delivery schedule to customers. Wang Hong stated on April 11th that after the earthquake on April 3rd, the company has resumed work and normal operations, and related products and services have not been delayed as a result.
What is the impact on the market?
Referring to the impact of the Hualien earthquake with a higher magnitude on April 3rd, multiple industry analysis institutions or data monitoring platforms have tracked subsequent market changes, and some institutions believe that the impact is limited.
After the earthquake on April 3rd, SiliconExpert tracked the impact of supply chain disruptions and found that as of April 8th, early warning signals of market changes were not significant.
According to data from Jibang Consulting on April 10th, the inventory of DDR3 in DRAM products is relatively low, and there is still room for price increases. The inventory of DDR4 and DDR5 is relatively sufficient, and coupled with weak buying sentiment, the daily small rise pattern caused by the earthquake is expected to return to normal within a few days.
On April 23rd, regarding the impact of the earthquake since April 3rd on the supply or quotation of upstream storage chips, as well as on the company's SSD, memory card and other products, storage manufacturer Qunlian Electronics told First Financial reporters, "We have no impact here.".
However, electronic component procurement solution provider Fusheng stated in a document on April 22 that the impact of the April 3 earthquake on production is minimal, but certain commodity groups will face supply constraints, depending on the level of customer buffer inventory.
Fusheng stated that current forecasts indicate that as manufacturers anticipate a surge in demand after an earthquake, memory product prices may rise by up to 20%. To cope with the expected impact, most companies in Taiwan have suspended quotations and shipments, resulting in a significant halt in DRAM production and an impact on LPDDR. Customers can expect spot prices to further increase in the coming weeks.
From the perspective of mainstream e-commerce platform prices, as of now, the impact of the earthquake on the end consumer market is still limited, and there has not been much fluctuation in the prices of DRAM and NAND products recently.
The Slowly Buy Comparison Platform shows that among DRAM products, the top five on the JD DDR5 memory list have remained stable in price since March, with some experiencing a slight decline since April. Among NAND products, most of the top five on the JD 960GB-1TB SSD solid-state drive list have remained stable in price. A Western Data 1TB product increased by about 500 yuan on April 7th and quickly returned to its original price. The price of a Samsung 1TB product increased from 799 yuan on April 3rd to 849 yuan on April 10th, but quickly dropped to 739 yuan.
The relatively sluggish semiconductor market may be one reason why the prices of semiconductor terminal products have not yet been fully impacted by the earthquake.
Since the beginning of this year, the semiconductor market has been gradually recovering. Semiconductor distributors Lianchuangjie analyzed the semiconductor market in March this year, stating that "semiconductor practitioners should be able to clearly feel slight signs of market recovery, with slight changes in various fields, although the results are still very unsatisfactory.". Lianchuangjie stated that March has entered the traditional peak season for production and stocking, which should be a time for performance to refresh. However, the market is still in a very calm state with high inventory levels. Affected by terminal demand, the price of DRAM has slightly fallen, and terminal wait-and-see sentiment is heavy. The increase in flash memory has narrowed compared to the first two months of this year.