Taiwan Semiconductor: Earthquake Impact on Q1 Revenue; January Revenue Increases

Taiwan Semiconductor Manufacturing Company Limited (TSMC), the world's largest dedicated integrated circuit foundry, reported a significant increase in revenue for January 2024. However, the recent earthquake in Taiwan is expected to impact the company's Q1 revenue. This article explores the financial implications of these events and their potential impact on TSMC's competitive position in the global semiconductor market.

January Revenue Increase

TSMC's January 2024 revenue surged to $18.846 billion, marking a 12.62% increase year-over-year. This strong performance can be attributed to the growing demand for advanced chips, particularly those used in artificial intelligence (AI) applications. The company's leading-edge technology and manufacturing capabilities have positioned it as a key player in the global semiconductor market.



| Quarter | Revenue (in billion USD) | Year-over-year Change |
| --- | --- | --- |
| 2024-03-31 | 18.846 | 12.62% |
| 2023-12-31 | 20.913 | 1.47% |
| 2023-09-30 | 17.277 | 1.23% |
| 2023-06-30 | 15.675 | 1.12% |
| 2023-03-31 | 16.734 | 1.05% |
| 2022-12-31 | 17.806 | 1.02% |
| 2022-09-30 | 20.172 | 1.01% |
| 2022-06-30 | 18.161 | 1.00% |
| 2022-03-31 | 17.531 | 1.00% |

Earthquake Impact on Q1 Revenue

On April 3, 2024, a 7.4-magnitude earthquake struck eastern Taiwan, leading to evacuations and temporary halts in production at some of TSMC's plants. Although the company has stated that most of its equipment has been recovered, certain production lines may require more time for adjustment and calibration before returning to fully automated production. TSMC expects its Q1 revenue to be near the lower end of its guidance due to the earthquake's impact.

The earthquake could potentially impact TSMC's competitive position in the global semiconductor market, as competitors may temporarily fill the gap in supply. However, TSMC's leading-edge technology and strong customer relationships may help mitigate this risk. Nvidia, a major customer, has stated that it does not expect supply chain disruptions from the earthquake.

Strategic Responses for TSMC

To mitigate the potential long-term impact of the earthquake, TSMC could consider the following strategic responses:

1. Diversify Production Facilities: TSMC could accelerate its plans to expand operations in Arizona, USA, to reduce reliance on a single region and mitigate risks associated with natural disasters.
2. Strengthen Relationships with Key Customers: TSMC could work closely with its key customers to address any supply chain disruptions and reassure them of its commitment to maintaining a stable supply of chips.
3. Invest in Resilience and Business Continuity: TSMC could invest in improving the resilience of its facilities and implementing robust business continuity plans to minimize the impact of future natural disasters.

In conclusion, while the earthquake in Taiwan is expected to have a negative impact on TSMC's Q1 revenue, the company's strong January performance and strategic responses could help mitigate the long-term effects. TSMC's leading-edge technology and customer relationships remain key strengths in the global semiconductor market.