Taiwan Earthquake Ripple Effects ‘Might Not Be Known for Months’
A 7.4-magnitude earthquake rattled Taiwan early Wednesday morning, killing at least 10 people and injuring over 1,000 more. According to Taiwan’s National Fire Agency (NFA), another 700 remain trapped or stranded in areas impacted by the earthquake throughout the country.
The quake was the strongest to rock the island nation of 23 million people since 1999, causing mass power outages and landslides and damaging dozens of buildings. But the direct impacts on Taiwan itself also could create a ripple effect on supply chains out of the country.
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Textiles is one of many sectors that could see a disruption. As of 2022, according to data compiled by the Taiwan Textile Federation (TTF), textile and apparel exports out of the country amounted to $8.8 billion, with the island serving as home to 4,511 manufacturers.
“The textile manufacturing industry in Taiwan operates at every tier of the supply chain,” said Peter Guinto, vice president of president, government, defense and aerospace at Resilinc. “So there are fabric manufacturers—particularly a lot of artificial fibers are manufactured there into textile products that are exported for manufacturers in other places. There are finished textiles that are made there as well, so really every tier of the textile supply chain has potential for impact.”
According to Resilinc, a supply chain risk management software provider, 13,000 sites inside Taiwan were impacted by the Wednesday earthquake, as well as 21,000 products and 58,000 affected parts across industries.
“The bottom line is, if you don’t know the parts and the sites at each tier, you can’t get ahead of these things,” Guinto said.
Guinto said businesses that haven’t proactively mapped out supply chain dependencies will potentially be impacted months from now, even for a day-only event. This mapping is even more vital for companies that have multiple tiers of their supply chain embedded in Taiwan, whether it be yarn suppliers or other fabric producers.
“If a Tier 5 vendor experiences this issue and the supply chain hasn’t been mapped, a Tier 4 vendor might not know it’s a problem for a couple of weeks. And they might try to fix this problem for a couple of weeks, and then they’ll let the Tier 3 vendor know that they can’t fix it and this cycle will repeat itself,” Guinto told Sourcing Journal. “By the time the end client that manufactures something and finds out there’s an issue, it’s too late to fix it with a small amount of capital, so the fix is going to be more expensive and potentially not in time, which will cause delays to deliveries and disruptions to revenue.”
In a major positive for Taiwan’s response when it comes to national infrastructure, train services through the earthquake’s epicenter of Hualien County resumed within 24 hours of the natural disaster.
The quick infrastructure recovery represents a positive for Taiwanese exports at large.
“At a macro level, we don’t think the impact is going to be huge,” Giunto said. “But on an individual company level, it could be significant. And the impacts might not be known for months.”
That’s not to say all industries are risk free. Taiwan is the global hotspot for computer chip manufacturing, which could have put a major export of the nation at risk.
Taiwan’s largest company, Taiwan Semiconductor Manufacturing Co (TSMC) said it evacuated some fabrication plants at the time of the quake, but safety systems were operating normally throughout.
The chipmaker, which is the chief supplier of semiconductor chips for U.S. tech giants like Nvidia and Apple, also later said its workers were safe and had returned to their workplaces shortly after the earthquake.
Impacted facilities were expected to resume production during the night, TSMC said.
“There’s going to be a lot of product that’s just going to be thrown out. I think there’s probably just going to be a very relatively minor dip in production, but it will ripple out,” said Timothy Stone, vice president of supply chain risk management at Exiger. “And so we’ll see that we’ll see that manifest I think over the coming weeks.”
In total, Taiwan’s exports are $31.4 billion in February, a 1.3 percent year-over-year increase, according to the country’s Ministry of Finance (MOF). This is the second-highest monthly export totals.