TSMC halts some production after massive earthquake hits Taiwan

Taiwan experienced a 7.4 magnitude earthquake on Wednesday, the strongest in 25 years. The earthquake was followed by several aftershocks with tremors that went across the island, with an active Tsunami warning across the region.

Taiwan Semiconductor Manufacturing Company (TSM) was one of the businesses that halted some production in response to the event, once again raising concerns over the global tech supply chain as its a major supplier for tech companies like Apple (AAPL) and Nvidia (NVDA).

Yahoo Finance Anchor Madison Mills joins Morning Brief to break down the situation in Taiwan, how it will affect production, and the global supply chain for tech.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

SEANA SMITH: The strongest earthquake in 25 years hitting Taiwan today, leaving at least nine dead and hundreds injured, triggering a tsunami warning across the region. Now, Taiwan Semiconductor, one of the businesses there that halted some chip-making and evacuated plants, raising some concerns about the potential disruption when you take a look at the business impact, the disruption to the global tech supply chain. TSMC is the main contract chip maker to Apple and NVIDIA Here to break this all down, what that could potentially mean for investors, here is Maddy Mills. Maddy.

MADISON MILLS: Well, this is an important, kind of, wake up call. And that's what some of my sources are saying this morning about why you don't want to have the world's technology relying on just one region. And we've obviously seen some pushes from the US, in particular, with the CHIPS Act to try and move production to a domestic level.

But we have not seen that yet and that is because of the very unique conditions that are required for chips production. And that's why some analysts this morning saying, from Barclays in particular, it's very difficult to have such a delicate product being produced in a region that is very prone to some of these natural disasters. And that is why we don't know the extent yet to which this is going to impact chips production, but Barclays is saying that in their conversations with TSMC this morning, there's an estimate of a $60 million hit to TSMC's second quarter earnings.

I just want to point out as an area of comparison and context that last week, we saw that Carnival announced a $10 million hit to their earnings off of the bridge collapsed and we saw that really weighing on the stock. So I wouldn't be surprised if we see a similar move in TSMC today. We're seeing that stock down a little close to 1.5% here.

Having said that though, some other analysts' reaction. We're hearing from Citi saying that the impact to operations should be manageable. Jefferies saying that the downside should be limited. But I think it's just the broader picture of the concern that you have when the global economy is relying on one region, again very prone to natural disasters like this one, continuing to have these struggles come up with chips production, which so much of the world and the biggest companies that we cover all the time do rely on.

BRAD SMITH: And so an outage and stoppage. And, of course, so many worldwide thoughts are with those that are impacted by this earthquake even as we think about the larger ramifications that you were breaking down as well. Companies like Apple, companies who produce smart phones, companies who produce these mobile pieces of technology that rely on these chips as well, is it clear what type of broader ramification that a stoppage for at least a near-term period of time could have on some of those future plans?

MADISON MILLS: It's not fully clear yet. We know from spokespeople from TSMC and I've reached out to confirm. I haven't heard back from them yet. They've said that the halting to operations was limited. And it was just, kind of, standard procedure of what you do when something like this happens on the ground and that they should be able to get back pretty quickly.

But again, given that a lot of these chips that are in production are monitored for 24 hours, any halt to that could have a larger impact. So I'm still reaching out and waiting to get confirmation about the degree of that impact and how widespread that could be. But certainly, I think the $60 million number that we have from Barclays is something to watch heading into second quarter earnings.

BRAD SMITH: Absolutely. A development that we'll continue to monitor for our viewers out there as well. Maddy, thanks so much for breaking this down.