Global silicon shortage might get even worse, as Taiwan battles new outbreak

Taiwan is currently facing a new surge of cases and deaths related to Covid-19, with the death toll now over 400. While this is cause for concern for the Taiwanese economy, it may affect the rest of the world too in light of the global silicon shortage.

For context, Taiwan is the world leader in the semiconductor manufacturing industry, with over a fifth of the world’s global chip manufacturing capacity. As such, any major outbreak in Taiwan, especially in these silicon fabrication plants, may worsen the current crisis. Indeed, in the past week there’s already been a number of electronics factories that have been hit by Covid-19.

King Yuan Electronics Co (KYEC), who work with names such as MediaTek, had to shut down their main plant last week, before resuming work at lower volumes. Over 200 of their employees tested positive in the last month alone, with a further 2,000 staff quarantined. With KYEC being the second largest firm in chip testing around the world, their setbacks could potentially kickstart a domino effect around the world.

The biggest name among the Taiwanese electronics companies is the Taiwan Semiconductor Manufacturing Company (TSMC), and so far they’ve fortunately remained unperturbed by the recent outbreak. But with TSMC a major producer of chips for companies like Qualcomm, AMD and Apple, if the outbreak spreads to a TSMC plant, it is likely to worsen the current choke point for a vast number of companies.

There’s already been some countermeasure taken by the United States and China to lessen the global reliance on Taiwan for semiconductors. Billions in funds have been poured into the semiconductor industry by both nations, with the latest being USD52 billion from the US govt to kickstart the local silicon manufacturing sector. Others such as Intel and TSMC have also begun plans to build fabrication plants in America too.

The semiconductor industry at home is also at risk due to Covid-19. The Wall Street Journal mentioned that Malaysian fabrication plants are also working at lower capabilities. The Malaysia Semiconductor Industry Association said that the current MCO here has reduced output by around 15% to 40%. This comes on top of shipping centers in the region being forced to operate at lower capabilities too.

In the end though, the frustration of having to wait a while longer to upgrade your computer pales in comparison to losing lives over Covid-19. The world might just have to wait it out for more chips, as the pandemic continues to wreck havoc on the global supply chain.

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