On April 3, a 7.4-magnitude earthquake occurred off the coast of Hualien County, Taiwan, China. It was the strongest earthquake in 25 years, killing 9 people and injuring more than 900 people.

As the hub of global high-end manufacturing, the impact of the earthquake on Taiwan's chip industry has also attracted investors' attention. Preliminarily, although the magnitude of the earthquake was severe, its impact on wafer supply was relatively limited, which to some extent alleviated concerns about the international chip supply chain.

Nvidia statement: Earthquake will not affect chip supply

In U.S. stocks overnight, the share price of "AI leader" NVIDIA fell slightly by 0.6% to close at $889.64. The company stated that it had quickly contacted its main partner TSMC after the earthquake, and after assessment, it said it did not expect the earthquake to cause any disruption to its supply.

TSMC's largest production bases in Taiwan are all located in the west of the island, diagonally opposite the earthquake site. After the earthquake, some factories suspended production and evacuated workers. According to TSMC, despite a brief shutdown after the earthquake, its fabs returned to 70% of their previous capacity levels within 10 hours of the earthquake, while newer fabs returned to 80%.

TSMC also pointed out in a statement that only a small amount of equipment was damaged in the earthquake, but key equipment including extreme ultraviolet lithography machines (EUV) were not affected.

Market consulting firm TrendForce predicts that the earthquake's impact on Nvidia's chip supply will be "minimal."

Citibank pointed out in its latest report that the 6.6-magnitude earthquake in 2016 caused Taiwan Semiconductor's revenue to decrease by about 1%, and its gross profit margin fell by 2% to 3%. But the impact this time is expected to be small. Because TSMC has implemented strict anti-seismic production measures, including installing dampers in building facilities to enhance structural integrity, and using the most advanced anti-seismic technologies and methods to reduce risks.

United Microelectronics (UMC), another Taiwan-based wafer manufacturer, also said that the earthquake had "no substantial impact" on its operations, but that "some wafers" on the production line were affected when safety measures were activated.

Citi: Storage prices may rise?

However, despite initial indications, the earthquake caused little damage to Taiwan's chip factories. But the earthquake occurred at a time when memory demand is rebounding and there is a severe shortage of production capacity for high-end processors used in AIGC applications, highlighting the vulnerability of the global semiconductor industry.

The impact on memory chip DRAM production lines is still being assessed. TrendForce issued an article yesterday stating that the DRAM industry is mostly concentrated in the north and central parts of the country, and factories have been shutting down for inspections one after another. Although the inspections have not yet been completed, no major machine damage has been found so far.

Citibank said Taiwan contributes 15% of global DRAM production capacity. Earthquake-related capacity disruptions could shift the bargaining chip in current contract price negotiations "from the hands of customers to the hands of memory makers," with DRAM prices likely to see double-digit increases this quarter compared to the first quarter.

Micron Technology, a memory chip maker that has multiple factories in Taiwan, said in a statement that all of its employees in Taiwan have reported to work and reported safety. Micron said it is "evaluating the impact on our operations and supply chain" and will notify customers of changes to delivery commitments once the evaluation is complete.