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Earthquake Rocks Nvidia's Chip Lifeline in Taiwan

Earthquake Rocks Nvidia's Chip Lifeline in Taiwan
Earthquake Rocks Nvidia's Chip Lifeline in Taiwan

Nvidia's Reliance on TSMC Amid Taiwan's Earthquake

On April 3, 2024, a 7.4-magnitude earthquake struck Taiwan, temporarily halting production at Taiwan Semiconductor Manufacturing Company (TSMC), Nvidia's primary chip supplier. TSMC evacuated its factories after experiencing earthquake shocks of up to 5.0 magnitude.

TSMC's Resilience and Impact on Nvidia

TSMC reported minimal damage to its facilities and tool recovery of over 70% within 10 hours. However, analysts anticipate some production impact due to the need for further inspections and restoration efforts. Nvidia, TSMC's second-largest client, relies heavily on the chipmaker for its AI and graphics processing unit chipsets.

Taiwan's Seismic Risk and Mitigation Efforts

Taiwan experiences numerous earthquakes annually, and TSMC has implemented safety measures to mitigate risks. However, the recent earthquake highlights the potential vulnerability of chip manufacturing in the region. Nvidia's centralized operations in Taiwan pose a potential weakness due to its reliance on TSMC.

Political Threats and Alternative Manufacturing

Taiwan's ongoing military tensions with China add another layer of uncertainty to the security of TSMC's operations. Nvidia has been exploring alternative manufacturing locations in the U.S., while TSMC is establishing a plant in Arizona.

Industry Implications

The earthquake serves as a reminder of the fragility of semiconductor supply chains. Chip manufacturers rely on specialized equipment and clean room environments, which can be disrupted by natural disasters or other events. The impact on Nvidia highlights the importance of diversification and contingency planning in chip manufacturing.

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