TSMC Estimates TWD 127.7 Billion Damage from Taiwan Earthquake... Price Increase Expected

TSMC, the world's largest foundry (semiconductor contract manufacturer), announced on the 19th that it estimates a loss of 3 billion New Taiwan dollars (approximately 127.7 billion KRW) in the second quarter due to the earthquake in Taiwan.

In documents submitted to the Taiwan Stock Exchange, TSMC stated that the earthquake is expected to reduce the gross profit margin by 0.5 percentage points in the second quarter.

[Image source=Reuters Yonhap News]

However, there was no power outage or structural damage to the fab (semiconductor manufacturing plant), and key equipment, including extreme ultraviolet (EUV) lithography machines, was not affected by the earthquake. Although wafers in production at the time of the earthquake had to be discarded, most of the production loss is expected to be recovered in the second quarter, so the impact on second-quarter results is analyzed to be minimal.

TSMC analyzed that the Taiwanese government's electricity price increase has a greater impact on profitability than the earthquake. Since April, electricity rates have increased by 25%, and this is expected to reduce the quarterly gross profit margin by up to 0.8%.

Taiwanese media reported that TSMC expects second-quarter sales this year to be between 19.6 billion and 20.4 billion USD (approximately 27.1029 trillion to 28.2091 trillion KRW).

Furthermore, according to foreign media reports, TSMC plans to raise chip prices for production outside Taiwan due to global production facility expansion, electricity cost burdens, and advanced technology worsening profitability.

Wei Zhejia, TSMC's Chief Executive Officer (CEO), stated, "If customers request production in a specific region, customers must share the increased costs."

Governments and companies worldwide are trying to secure chip supply chains outside Taiwan, where more than 90% of the world's most advanced semiconductors are produced, to mitigate geopolitical risks. TSMC announced that it will receive 6.6 billion USD (approximately 9.1265 trillion KRW) in subsidies from the United States and invest 65 billion USD (approximately 89.882 trillion KRW) in the U.S.