TSMC's earnings call is scheduled for April 16, and one of the key factors the industry is watching is the potential consequence of supply chain disruptions, amid the Middle East crisis.
Taiwan's Reliance on LNG Imports From the Middle East Has Turned Out To Be a Costly Bet, One That Could Influence TSMC On a Larger Scale
The AI industry is centered on TSMC's semiconductor services, with not just entities such as NVIDIA, AMD, and Intel, but also hyperscalers and ASIC manufacturers. It won't be wrong to say that a disruption in TSMC's production lines could affect the supply chain in a much broader way, which is why many of us are closely watching what TSMC has to say about the situation at its next earnings call. A report by Taiwan's UDN discusses how the Taiwan chip giant will address the influence of geopolitics on its operations, and whether supply chain 'turbulences' could affect its output numbers.
According to industry experts, TSMC's earnings call will focus on the Middle East supply chain crisis and the company's ability to sustain operations in a complex landscape. In a previous report, we highlighted the risks associated with the semiconductor industry, given that the Strait of Hormuz remains closed for a prolonged period, and with that, a key point that we discussed was that it could potentially brew an 'LNG crisis', which could have a widespread impact on Taiwan's electricity generation numbers. If not mitigated, the energy supply to Taiwan is projected to be significantly affected by the Hormuz closure, creating a difficult situation for TSMC.
In terms of demand, TSMC's frontend and backend services are seeing peak customer utilization, driven by the infrastructure buildout. We recently talked about the scarcity of 3nm supply, to the point where the Taiwan chip giant is forced to pick and choose customers and allocate supply to them. At the same time, advanced packaging products, mainly CoWoS and their derivatives, face immense demand, indicating that demand prospects are not slowing. However, if the Middle East crisis deepens, TSMC could be forced into a situation it could never have avoided.
Given that TSMC's sustenance is important not just for Taiwan but for the global AI industry, there have been alternatives being discussed to reduce the reliance on LNG imports from the Middle East, and one prospect that has been talked about is an aggressive change in shipping routes to directly source LNG from the US or its allies. While this is a costly venture, it may be the only option to ensure Taiwan's industrial output remains consistent.
For now, Taiwan is relying on its LNG stockpiles, which are reported to be sufficient for just a few days, meaning that the longer the Middle East crisis persists, the more difficult it would be for TSMC and Taiwan to continue their domestic/industrial operations.
About the author: Muhammad Zuhair is a hardware and technology reporter for Wccftech, specializing in the semiconductor industry and the complex interplay between technology, manufacturing, and geopolitics. His coverage focuses on the corporate strategies and technological roadmaps of industry giants like TSMC, NVIDIA, Samsung, and Intel. Zuhair's expertise lies in deconstructing complex topics such as fabrication nodes (e.g., 2nm process), the economic impact of policies like the CHIPS Act, and the strategic development of AI infrastructure from NVIDIA, AMD and Intel.
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