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Human error and shaky grid spark new global-chip supply concerns

Human error and worst-case scenarios triggered a widespread power outage in Taiwan, rocking its reliability as a top supplier of computer chips as the industry grapples with a global shortage.

A dual coal- and gas-fired power plant in the southern city of Kaohsiung went offline Thursday after a technician accidentally flipped the wrong switch, resulting in a sudden drop in voltage that caused the plant to shut down as a protective measure, state-run utility Taiwan Power Co. said in a statement Friday.

The failure came at precisely the wrong time, overloading an electricity grid already stretched by rising temperatures, a water shortage, volatile solar output and higher-than-expected power consumption, and snowballed into a blackout that hit Taiwan’s major cities, including Taipei. The outage temporarily affected more than 4 million households and nearly half of Taiwan’s industrial parks before power was restored Thursday night.

The fragility of the power grid has now become a global issue. Taiwan is home to Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, and a few hours without electricity is enough to disrupt global supply chains.

A worldwide shortage of high-end semiconductors has heightened concerns, triggering a scramble among major companies, from consumer electronics brands to automakers, to secure scarce supplies of chips from TSMC and its domestic peers. The blackout may also heighten scrutiny of the government’s effort to rid Taiwan of nuclear and coal, which opponents see as reliable sources of power.

If a semiconductor fabrication plant “is suddenly halted by a power outage, can lose what is equivalent to about one month of output,” said Bloomberg Intelligence analyst Charles Shum. “It’s not just the wafers in fabrication that have to be abandoned, all machines have to put in idle for maintenance and re-calibration.”

TSMC, the world’s top foundry, experienced a brief power dip at some facilities, but the supply is currently back to normal, the company said in an emailed statement. There was no major impact on its operations, a spokeswoman said. ASE Technology Holding Co., the world’s largest chip packaging provider, said Thursday that its operations were affected and the full impact has yet to be determined.

Analysts see little likelihood of TSMC being affected by similar shortages in the future, even as it consumes more electricity due to new power-hungry extreme ultraviolet lithography chip-making technology, as the government is likely to prioritize its resource needs over other users.

“It is also going to be challenging for TSMC’s customers to diversify their orders as right now most chipmakers are running at full capacity,” said Elsa Cheng, an analyst at GF Securities. “Further, TSMC offers superior yield rate compared to its rivals, a critical element that will ensure its customers can launch their products on time.”

In a statement apologizing for the incident, Taipower said that electricity consumption exceeded the company’s initial estimates due to high temperatures and strong economic activity. The incident occurred in the afternoon, when solar output was falling, while a water shortage meant that hydropower generation was weak, according to Taipower. Power consumption has steadily climbed since the start of May, the utility said, promising to review its operations.

“Blackouts and reliability problems could become worse in Taiwan,” said Alex Whitworth, head of Asia-Pacific power and renewables research at Wood Mackenzie Ltd. The share of intermittent wind and solar power is expected to continue growing, which could put much more stress on the power system, he said.

Four years ago, a blackout caused by a blunder at Taiwan’s biggest gas-fired plant affected six million households and disrupted some semiconductor production. BloombergQuint

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