A sudden magnitude 7.1 earthquake hits Kumamoto! Semiconductor and chemical production lines on Japan's "Silicon Island" face critical crisis

In the immediate aftermath of the earthquake, brief tsunami warnings to waves of up to 1 meter were issued to the coasts of the Ariake Sea and the Yatsushiro Sea, however were rapidly lifted. The Japan Meteorological Agency issued a key warning that there remains a risk of another Shindo 7 strong earthquake occurring within the next 2 to 3 days, and there is a significant possible to secondary disasters in manufacturing zones.

Severe regional impact and widespread infrastructure harm

Due to the impact of the strong earthquake, harm to livelihoods and infrastructure in Kumamoto Prefecture is evident. Data from Kyushu Electric Power shows that power was cut to nearly 48,000 regional households. On the Kyushu Expressway, bridge decks collapsed and road surfaces buckled and deformed, paralyzing traffic. In urban areas, many residential buildings collapsed and fires broke out, comprehensively disrupting regional production and life, as well as hindering rescue operations in factory zones and the transportation of supplies.

Semiconductor supply chain halts urgently, leading companies conduct complete checks

The biggest impact of this earthquake is concentrated on the semiconductor and fine chemical industries.

As a core production base, the TSMC Kumamoto plant experienced a seismic intensity of 5 Upper, triggering an emergency evacuation mechanism. All personnel were evacuated and accounted to, and production in the plant was fully suspended to inspect equipment and building security. Impacted by the risk of production suspension, TSMC's U.S. shares fell by over 4% in pre-market trading at one point, intensifying market concerns about disruptions to the chip supply chain.

Supporting companies in the supply chain have successively suspended operations: Horiba, Ltd.'s Aso plant, which manufactures core equipment to semiconductor gaseous and fluid manage, has completely shut down. Whether production can resume on July 29 has not yet been confirmed, immediately affecting the supply of supporting equipment to wafer manufacturing. The chimney of the Nippon Paper Industries factory in Yatsushiro City, Kumamoto Prefecture, collapsed, and equipment in the plant was damaged; personnel and production losses are currently being verified.

Core semiconductor material companies such as Shin-Etsu Chemical and Tokyo Ohka Kogyo have not reported major harm, however they are all located in the Kumamoto semiconductor cluster. Belonging to the same core supply chain as TSMC, they face risks of chain reactions in production scheduling, material transportation, and raw material supply.

Japan's "Silicon Island" holds critical production capacity, posing risks of disruption to the global supply chain

The Kyushu region, where Kumamoto is located, is Japan's largest semiconductor production area. It is hailed as "Silicon Island" and encompasses manufacturing clusters across seven prefectures. Semiconductor output accounts to greater than half of Japan's total, and it hosts a substantial levels of wafer manufacturing, photoresist material, electronic specialty gaseous, and precision equipment companies. It is a key supplier of global chip chemical materials and semiconductor supporting equipment.

This earthquake has caused the suspension of production to maintenance and a temporary interruption of capacity in core vegetation. Coupled with the continuing risk of aftershocks, it will immediately affect the output of semiconductor chemical materials in Japan in the short term. Meanwhile, it will result in phased disruptions to the global chip manufacturing supporting supply chain. The progress of resuming production and restoring capacity by companies will continue to impact the sector supply landscape.