The Chip Insider® – Taiwan’s Earthquake

Author: G. Dan Hutcheson

The Chip Insider® – Taiwan’s Earthquake


Taiwan’s Earthquake: Earthquakes and other disasters are always big news events with much dire commentary from experts as to how the earthquake could, might, or may be very disruptive to our industry. I’m always a bit more balanced, because our industry has resilient supply chains thanks to the many incredible supply chain managers that work 7/24 to smooth out kinks when the chips are … literally … down.

Then there are the facility people who work tirelessly to bring capacity back on line when it is taken out. It is true that decades ago, disasters could have major impacts. However, we’ve learned to greatly mitigate the impact of these disasters. While it has meant fabs cost more to build, they are much safer to work in and more resilient to potential disasters. History has proven this out.

As for the methodology to prove this, I first aligned previous disasters to the same point in time and took the difference between the month-over-month growth and a 5-year average of growths for the same month…

Pricing is where you would expect the impact of a disaster-induced supply shortage would be most visible. In fact, the deviations immediately following the disasters are not far greater than what was normally occurring in the market before. During the month of a disaster, prices were up 2.2% on average, with a maximum of 11% in the Sendai quake and a low of -1.0 the month of the Loma Prieta quake…

Interestingly, the average for the twelve months following the event (M0) was +0.6%... with a lower standard deviation than the twelve months before. So the market… became more stable after the earthquake. Since it went on for 12 months … More likely it was a shift in willingness to hold more inventory … that drove prices up.

“History never repeats itself but it often rhymes” – as Mark Twain is reputed to have said

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