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Tuesday, September 21, 1999 Published at 22:04 GMT 23:04 UK

Business: The Economy

Earthquake may hit chip makers

Taiwan's main industries may have escaped the worst damage

The Taiwan earthquake sent a ripple through world stock markets as attention focused on the island's semi-conductor industry.

Quake in Taiwan
Taiwanese firms account for about 5% of the world D-Ram market but their share is nearer 12% once outsourcing for Japanese and other makers is included, said industry analysts.

D-Rams - dynamic random access memory chips - are a fundamental component of every personal computer.

Although Tuesday evening (GMT) was still too early to say how much damage had been done to the computer chip industry, at least one company reported that production would be disrupted.

Taiwan Semiconductor Manufacturing (TSMC) said that a preliminary analysis after the earthquake indicated it may lose about 10% of this month's production.

The assessment was not final and recovery to normal operations will be a gradual process over the next few days, the company said.

Damage limited

The Hsinchu Industrial Park, where TSMC and a number of other companies are located, was still without normal electrical power.

Some economists believe the earthquake will not derail the island's rapid economic growth because key ports and the semi-conductor businesses escaped the worst damage.

Economists said the financial fallout should be limited since the quake was centred in a mountainous region dominated by agriculture and tourism.

Taiwan's latest forecasts had predicted economic growth of 5.7% this year. Investment bank CS First Boston said the earthquake may trim that figure by up to 0.4%.

The effect of the earthquake added to the uncertainty hitting share values in New York on Tuesday, a fall which had a knock-on effect in late European trading but Taipei's stock market was closed on Tuesday and Wednesday.

"If in fact there has been damage it could be very serious," said Mark Mobius, president of the Templeton Emerging Market Fund of the chip industry.

"They need very clean rooms. This could have caused contamination."

Despite reports of little damage, shares in European and South Korean semi-conductor firms rose, anticipating reduced supply from Taiwan.

Intel said that the earthquake may lift prices for memory or D-Ram chips and other computer components, but it was too early yet to assess the damage.

Philips, which has a 27.6% stake in TSMC, was slightly down because of its Taiwan investment but France's STMicroelectronics, the ninth biggest chipmaker, gained 2.4%, but closed down 0.72%.

A knock-on effect might be felt by electronics manufacturers who use custom-made chips from Taiwan that are not easily replaceable.

South Korean chipmakers, leaders in the world memory chip industry, saw their share prices soar earlier on Tuesday.

The 64-megabit D-Ram price has been trading at around $12 a unit recently, below the year's high of $15 but far above the $4 which prevailed back in June, said analysts.

The recent price surge was attributed to strong personal computer sales tied to free PC offers.

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