Chips, also known as semiconductors, are fundamental components of the modern electronics industry. They are made from semiconductor materials such as silicon and can conduct electricity in a controlled manner. This means they can be used to process information, store data, and control the operation of electronic devices.
Chips are found in a wide variety of products, from smartphones and computers to household appliances, vehicles, and medical equipment. They play a crucial role in contemporary technology, enabling the functionality of virtually all electronic devices we use daily.
The complexity of chips can vary significantly, ranging from simple devices with basic functions to highly sophisticated chips capable of performing complex calculations and processing large volumes of data in real time. With technological advancements, chips have become increasingly smaller, more powerful, and more energy-efficient.
Chip production is a globalized and highly competitive industry, with leading companies in countries such as Taiwan, the United States, South Korea, and Japan. The demand for chips has been steadily growing, driven by the increasing digitization of various economic sectors, including communications, automation, artificial intelligence, virtual reality, and the Internet of Things.
However, chip production also faces challenges such as the increasing complexity of manufacturing processes, dependence on specific materials and technologies, as well as issues related to cybersecurity and intellectual property protection. A disruption in the chip supply chain—whether due to natural disasters, geopolitical conflicts, or technical problems—can have significant impacts on various industries and the global economy as a whole.
Last Wednesday (3), an earthquake struck Taiwan, a country responsible for 90% of the world’s most advanced semiconductor production. These chips are essential for technology companies, automakers, and various global industries.
Although the United States is home to tech giants such as Apple, Amazon, and Microsoft, Taiwan is the center of production for these vital components. The earthquake, the strongest in 25 years in the region, raised concerns about the stability of chip supply, leading some factories to temporarily halt operations to assess damage. Fortunately, initial reports indicated minimal damage.
However, the event highlights the risks that natural disasters pose to the chip supply chain, potentially causing significant impacts across multiple industries. This adds to the challenges faced during the recent “chip crisis,” which affected car production and other sectors between 2020 and 2023.
A chip is a tiny component made of semiconductor material, primarily silicon (found in sand). This component contains an electronic circuit and is classified as a semiconductor because it allows electricity to pass through—though in smaller quantities than copper, for example—but does not act as an insulator.
By controlling the flow and interruption of electricity, chips enable various functions in electronic devices, such as executing commands when a button is pressed and storing data.
Chips are not only found in cell phones but also in a variety of other devices, such as bank cards, refrigerators, washing machines, LED lamps, and even airplanes. In modern cars, thousands of chips are used in systems such as the onboard computer, engine management, and navigation control.
Although the United States invented the chip, Taiwan is currently responsible for producing 90% of the world’s most advanced models. This includes the chips necessary for artificial intelligence development, which are highly sophisticated.
Taiwan’s concentration of chip production has become a central point of political and economic dispute between China and the United States, reflecting the strategic importance of this component in the modern technological era.
Taiwan’s rise in the chip industry began in the 1970s when the country shifted its investments to this sector, abandoning its traditional agricultural base and becoming the epicenter of the world’s most advanced chip production.
The industry’s leading company, Taiwan Semiconductor Manufacturing Company (TSMC), was founded in 1987 and established itself as a global leader. TSMC supplies components to giants like Apple, which produces the iPhone, and Nvidia, which has gained prominence in the market thanks to the development of complex chips, especially those used in artificial intelligence.
Chris Miller, historian and author of Chip War, highlights that nearly all cell phones, most computers, and numerous databases worldwide contain chips produced by TSMC, which has the exclusive capability to manufacture them. Additionally, 90% of the planet’s most advanced processing chips come from its factories.
TSMC’s empire includes nine factories in Taiwan, with plans for expansion to include a facility in Japan and others in the United States and Germany. The company employs around 73,000 people, according to Forbes magazine.
According to The New York Times, South Korea, home to Samsung, is close to Taiwan in terms of chip manufacturing capacity. However, Taiwanese semiconductors remain smaller and faster than South Korean ones.
Taiwan’s dominance in chip production has led to a political crisis with the United States, which imposed sanctions on the country, “prohibiting” the export of technology to China, arguing that the Chinese were seeking to develop tactical war weapons.
A disruption in chip production would be significant, as the chip market is already facing a crisis that is affecting multiple companies across different sectors. The COVID-19 pandemic increased the demand for electronic devices as people started working from home. At the same time, the automotive industry reduced its demand for chips at the beginning of the pandemic but regained strength in late 2020.
However, automakers struggled to acquire the semiconductors they needed, including simpler chip models. In 2022, several manufacturers were forced to halt vehicle production due to the chip shortage.
A study by consulting firm Gartner, released in 2021, indicated that the shortage also resulted in delays in the release and availability of cell phones.
According to Reuters, TSMC reported temporarily suspending work at its factories after the earthquake to assess the impacts. In a statement sent to NPR, TSMC mentioned that only “a small number of pieces of equipment were damaged at certain units,” resulting in a partial impact on operations. However, the company stated that “no essential tools were damaged.”
United Microelectronics Corp (UMC), TSMC’s competitor in Taiwan, reported that all its employees were safe and that its factories were operating normally on Wednesday, according to Reuters. Although some machines were shut down, the company was working to restart them.
NPR noted that due to the significant volume of production concentrated in the country, market analysts warn that even minimal disruptions can lead to shipment delays and financial losses amounting to millions of dollars.
