How chipmaker TSMC strengthened its foundry to weather Taiwan's largest earthquake in 25 years

Taiwan Semiconductor Manufacturing Company (TSMC), the giant semiconductor chip maker, evacuated its workers after a 7.4-magnitude earthquake rocked the country on Wednesday, with no major damage reported. Its employees returned to work just hours after aftershocks struck across the island. It's not the company's first rodeo dealing with natural disasters.

TSMC, a major supplier of chips to Apple and AI darling Nvidia, told Fortune that it moved its workers from some of its production centers as a precaution and temporarily halted operations during the earthquake and its immediate aftershocks. While the company reported damage to a “small number” of tools, and is conducting an ongoing inspection to assess the full damage, it said its manufacturing plants recovered 70% of the tools within 10 hours of the quake, and that its “critical tools,” such as lithography tools, remained Millions of dollars' worth of UVB remains unharmed.

“TSMC is deploying all available resources for a full recovery, and the affected facilities are expected to resume production overnight,” TSMC said in a statement to Fortune.

The manufacturer, as evidenced by its damage limits, is no stranger to being nimble in the face of natural disasters. Taiwan experiences about 2,200 earthquakes annually, according to the Earthquake Center of the Central Weather Administration, and more than 200 of them can be felt. The ubiquity of these events has forced the company to make necessary changes to its operations.

“Seismic activity presents a significant challenge to companies implementing the most precise manufacturing processes in any industry,” Mark Williams, chief Asia economist at Capital Economics, wrote in an April 3 note. “But it's one of the things Taiwanese chipmakers grew up with.”

TSMC did not tell Fortune the conclusions of its inspection or how the work stoppage will affect business, but there is precedent for Wednesday's setbacks: In 2016, a 6.6-magnitude earthquake shook TSMC's Tainan manufacturing plants. In the wake of the disaster, the company insisted that the quake would not affect first-quarter shipments by more than 1%. In fact, wafer shipments saw a 1.8% decline QoQ, but revenue for the quarter was down 8.3%.

“Although the February 6 earthquake caused some delays in chip shipments in the first quarter, we saw an uptick in business due to increased demand in the mid-range and low-end smartphone segments and restocking of customer inventory,” said Laura Ho, senior vice president of human resources at TSMC. Then the CFO, he said in his 2016 first-quarter earnings report.

In the wake of the disaster, TSMC reinforced the roofs of its facilities with supports and added stops to the tower's storage racks to prevent slippage.

Learning from the past

It took a massive natural disaster for TSMC to begin seriously reviewing its protocols and infrastructure. The record for Wednesday's 7.4-magnitude quake was the 1999 7.6-magnitude quake, which killed 2,415 people, injured more than 11,000 and caused $300 million in damage.

In the wake of the 1999 earthquake, TSMC improved the seismic coefficient, or loads equivalent to seismic activity—25% more than legally required for its new main buildings—and added additional stabilizers on its equipment. It has made additional incremental changes to its infrastructure, including dampers that disperse kinetic energy caused by earthquakes, reducing the seismic activity felt by buildings by 15-20%. In 2015, TSMC installed an earthquake early warning system. The company did not respond to Fortune's request for comment on the changes it plans to make in the wake of Wednesday's natural disaster.

TSMC's earthquake preparedness is a cross-section of the changes Taiwan has made to its infrastructure to mitigate earthquake-related damage and deaths. While more than 300,000 homes were without power after Wednesday's earthquake, 70% of them had their electricity restored by 9:30 a.m.

Taiwan has developed a disaster response team in the past three to five years to manage disasters, Wu Yemin, a professor of earth sciences at National Taiwan University and a team leader at the National Science and Technology Center for Disaster Reduction, told Bloomberg. The team can scan information online to inform where to send help and can detect mobile phone signals and view screenshots of surveillance footage to assess damage and traffic patterns.

“Taiwan continues to develop these technologies, and we have advantages,” Wu said.

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