Taiwan earthquake and tsunami warnings will harm already strained semiconductor industry, says Joseph Dahrieh

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Written on Apr 3, 2024

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Thailand's earthquake will have disastrous ripple effects on several markets.
Those to be hit hardest include semiconductor companies like TSMC, which had to evacuate factory areas today.
We interviewed Joseph Dahrieh, managing principal at Tickmill, for his views.

Just before midnight today (in GMT), an earthquake with a magnitude of 7.5 on the Richter scale hit Taiwan, killing at least nine and making waves in the financial markets.

But it is the semiconductor companies stock prices which could be shaken mot, according to experts. We spoke to Joseph Dahrieh, managing principal at Tickmill, for his views. Edited excerpts:

What short-term effects will the Taiwan earthquake and tsunami warnings will have on the markets?

The earthquake has raised concerns about the global semiconductor industry’s production capacity. With already strained supply chains and production delays, the disaster threatens to exacerbate the ongoing semiconductor shortage.

The economic impact could be significant, as semiconductors power a multitude of essential products and processes worldwide.

In the short term, financial markets may exhibit some volatility as investors assess the extent of the impact on supply chains and corporate earnings, particularly in the technology sector.

What markets in particular will be most affected?

The earthquake in Taiwan could send ripples through various stock markets, notably impacting semiconductor stocks like Taiwan Semiconductor Manufacturing Co and Foxconn.

Fabless semiconductor companies elsewhere like Broadcom, Qualcomm, and others could see a negative impact on their stock prices and on their bottom line if the earthquake’s effect on chip production is more lasting.

Other sectors dependent on chips, like automakers, could potentially be impacted as well.

Do you think any volatility in the markets caused by the quake is likely to be short-lived?

The earthquake has sparked some market volatility, particularly impacting the vital semiconductor industry.

Historically, such natural disasters prompt immediate market fluctuations, but these tend to diminish over time. While investor sentiment may sway temporarily, markets could stabilize in the medium to long term. The extent of the damage and speed of recovery in production could influence the duration of volatility.