In another tragic event this week, Taiwan was hit with a 7.4 magnitude earthquake, killing at least 10 people and injuring more than 1,000. Harrowing images and video footage posted by news outlets show entire buildings leaning precariously and landslides tumbling down mountainsides.
According to the New York Times, 71 people were trapped in two mining areas in the epicenter of the quake, 14,000 households were without water and another 1,000 lost power. Aftershocks of the original earthquake continued all day, totaling over 100 by late afternoon. Experts warned that more aftershocks could lead to additional landslides.
The earthquake also has economic implications, as production was disrupted at the island’s semiconductor companies, “with potential repercussions for the global technology industry” reports Bloomberg. “Taiwan plays a critical role in the manufacture of the advanced chips that power cutting-edge technologies such as generative artificial intelligence and the latest smartphones and electric vehicles.” Apple and Nvidia’s main chipmaker, TSMC, relocated staff and is assessing damage, the Bloomberg article continues.
Chip production is a delicate process; any interruption of production risks upsetting the process, Reuters notes. “Highly sophisticated semiconductor fabs need to operate seamlessly 24/7 in a vacuum state for several weeks and the halts would disrupt the process,” including in other countries manufacturing electronics — upstream in Japan and Korea, and downstream in China and Vietnam. These delays may result in an increase in chip prices, Reuters continues.
Taiwan produces 80-90% of the world’s most advanced semiconductor chips, and there is no available substitute, Bloomberg notes. TSMC’s chip production is intentionally concentrated on the island so engineers could share their expertise on the complicated process; however, following the Covid-related supply chain delays and national security concerns, many governments have asked the company to diversify geographically. The company is currently building plants in Japan and the U.S., but their chips won’t be the most advanced variety.
This natural disaster is only the latest in the string of tragedies that have struck the world’s supply chains. “The globalized nature of modern supply chains exposes companies to a wide range of risks, from natural disasters and political instability to pandemics and labor crises,” ASCM’s editor-in-chief, Elizabeth Rennie, recently wrote in an exploration of supply chain resilience. For instance, just last week, the bridge collapse that devastated Baltimore has forced cargo ships, included car carriers, to reroute around the wreckage, reports Automotive Logistics. “Baltimore is the busiest U.S. vehicle-handling port in the U.S.,” but with the route indefinitely closed, the ships have rerouted to New York. These diversions could result in bottlenecks, labor constraints and trucking availability.
However, one lesson that we can all learn from the earthquake in Taiwan is being prepared for the inevitable. Although any loss of life is a tragedy, the reality is that it could have been much worse for the island. “Decades of work learning from other disasters, implementing strict building codes and increasing public awareness have gone into helping its people weather frequent strong quakes,” the Times praises the country. In other words, it’s vital to have a strategy in place to address likely disruptions up and down your supply chain, whether it’s replacement sourcing for fundamental materials or alternative routes for logistical stoppages. Reducing risk is an integral part of building resiliency and limiting costly delays.
