There’s one major reason why Taiwan’s earthquake has the global economy on edge

As Taiwan recovers from a deadly 7.2 magnitude earthquake, the figurative aftershocks may be felt as far away as Silicon Valley. As the producer of almost all the world’s most advanced microchips, the East Asian island nation plays an outsized role in providing the brains for everything from computers to cars to the latest AI – and any interruption could be damaging.

Here’s what you need to know about the quake’s implications for Taiwan Semiconductor Manufacturing (TSMC), why it matters, and how it’s connected to ongoing tensions with China.

TSMC is one of the few companies in the world that can make nanometre-scale microchip components.

TSMC is one of the few companies in the world that can make nanometre-scale microchip components.Credit: Bloomberg

What is TSMC?

Taiwan’s largest company, TSMC, is also the world’s biggest semiconductor foundry. Combined with other Taiwanese manufacturers, which are all headquartered in the north-western city of Hsinchu, it builds some 90 per cent of the world’s most powerful microchips.

Almost all of the other major semiconductor companies in the world are “fabless”, meaning they design the chips but send the schematics to an external manufacturer (generally TSMC) to have them made. This includes Nvidia, Apple, AMD and Qualcomm.


Why is TSMC so important?

For the Taiwanese government, which is the company’s largest shareholder, TSMC is vital as it accounts for around 30 per cent of the Taiwan stock exchange’s main index, exporting hundreds of billions of dollars worth of chips every year. But TSMC is also essential in providing a huge amount of the world’s advanced technology.

With the boom in AI requiring more and more powerful chips, and continued demand for smartphones and other processor-intensive hardware, TSMC is already struggling to scale fast enough to meet demand. It is opening up new fabs in Japan, Germany and the US, but they won’t be pushing out chips to their full capacity until 2028 at the earliest.

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