TSMC recovers 80 percent of virus-hit production line, warns of production delays

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Apple chip supplier Taiwan Semiconductor Manufacturing Company is close to returning its production lines back to normal, after a targeted computer virus took down several of its factories on Friday, with the firm aiming to recover all of its production lines by the end of Monday.




Approximately 80 percent of the fabrication tools that were infected on Friday in the attack have been restored to a pre-virus state, TSMC advised to Bloomberg on Monday, with a full recovery by Monday. While the full impact of the attack was not disclosed, TSMC warns of delayed shipments of components from its facilities to its clients.

No confidential information was compromised in the attack, TSMC claims, advising it has also contacted most customers about the issues.

TSMC is a major production partner for Apple, producing the A-series processors used in the iPhone, iPad, and other product lines. TSMC declined to state whether Apple's orders would be affected by the outage, but considering the size of Apple's orders, some impact is to be expected.

As chip manufacturing can take some time to get going, the stoppage can potentially cause the loss of weeks of production. As TSMC was in the process of ramping up its chip production for Apple's 2018 iPhone models, expected to launch in September, this could potentially cause for reduced supplies of iPhones to be available when it goes on sale, or even a delayed release until more supplies become available.

"TSMC has taken actions to close this security gap and further strengthen security measures," Chief Financial Officer Lora Ho advised on Sunday. In a previous interview, the CFO admitted TSMC had been attacked by viruses before, but it was the first time a virus had affected the company's production lines.

A statement from TSMC claims the virus outbreak was due to a "misoperation" during the software installation process of a new tool, with the virus spreading once the tool was connected to the rest of the TSMC network. The company confirmed it was not the work of a network intrusion on Saturday.

As for its own finances, TSMC estimated its third-quarter revenue would be cut by around 3 percent, reducing a previous forecast from $8.55 billion to $8.45 billion, with its gross margin slipping by 1 percent.

TSMC recently released underwhelming quarterly results, and was expecting "high signal digit" growth this quarter, relying heavily on the latest iPhones. In May, AppleInsider reported that TSMC had started production of the next generation 7-nanometer A12 processors.

Comments

  • Reply 1 of 11
    lkrupplkrupp Posts: 6,608member
    I’m not normally a conspiracy theory guy but watch AAPL pullback this morning. That this happened just as AAPL hit a milestone is quite a coincidence wouldn’t you think? Of course it’s already being trumpeted across the Internet that this will “possibly” cause delays in the September product releases. The hand wringing and “concern” has begun, the perfect formula for shorting AAPL. I wonder if there’s something else going on here.
    edited August 2018 flyingdpanton zuykov
  • Reply 2 of 11
    dewmedewme Posts: 1,894member
    Why would the statement from TSMC regarding this security breach be coming from the CFO and not the CISO (chief information security officer)? If I had to guess they probably do not have a CISO in their executive suite and leave responsibility and accountability for enterprise security matters to someone much lower in their organization. Companies that do not consider security an executive level responsibility don't quite get it and are placing their organizations and stakeholders at great risk. This is unacceptable. 
    larryjwjbdragonGeorgeBMacllama
  • Reply 3 of 11
    MacProMacPro Posts: 17,875member
    Sounds like they are recovering well but if your right and I kind of suspect you are, then I'll buy more AAPL on any such dip.
    edited August 2018
  • Reply 4 of 11
    mf2kmf2k Posts: 8member
    I'm guessing that "high signal digit" growth was meant to be "single" digit growth. 
  • Reply 5 of 11
    anton zuykovanton zuykov Posts: 1,031member
    lkrupp said:
    I’m not normally a conspiracy theory guy but watch AAPL pullback this morning. That this happened just as AAPL hit a milestone is quite a coincidence wouldn’t you think? Of course it’s already being trumpeted across the Internet that this will “possibly” cause delays in the September product releases. The hand wringing and “concern” has begun, the perfect formula for shorting AAPL. I wonder if there’s something else going on here.
    Even if there is, prepare to buy more, then )
  • Reply 6 of 11
    GeorgeBMacGeorgeBMac Posts: 3,575member
    dewme said:
    Why would the statement from TSMC regarding this security breach be coming from the CFO and not the CISO (chief information security officer)? If I had to guess they probably do not have a CISO in their executive suite and leave responsibility and accountability for enterprise security matters to someone much lower in their organization. Companies that do not consider security an executive level responsibility don't quite get it and are placing their organizations and stakeholders at great risk. This is unacceptable. 
    It's dumb that they place themselves at risk.  Well, actually, it's a business decision -- it may be cheaper to take the hit.

    But, when the attack affects others, that's a whole different story.  Here, their own customers were impacted with delays and those customers can make their own decisions going forward.

    But, when it's members of the public who had their personal information stolen, that's a whole other level of wrong.   Actually, in that case, corporate executives need to be given time to rethink their decision in a safe place -- like behind iron bars...
  • Reply 7 of 11
    ronnronn Posts: 312member
    Much ado about nothing. Apple is so large that either TSMC will make sure there won’t be a delay in production for them or alternatively Apple can just announce a release date that’ll ensure adequate supply. There can’t be a delay when there hasn’t been an announcement for the new lineup. We’re several weeks away from an announcement if we go by previous releases. I suspect the event on September 12 with launch day September 21.
  • Reply 8 of 11
    damonfdamonf Posts: 217member
    ronn said:
    Much ado about nothing. Apple is so large that either TSMC will make sure there won’t be a delay in production for them or alternatively Apple can just announce a release date that’ll ensure adequate supply. There can’t be a delay when there hasn’t been an announcement for the new lineup. We’re several weeks away from an announcement if we go by previous releases. I suspect the event on September 12 with launch day September 21.
    There would be a realized delay and impact: Apple has already announced their fiscal Q4 revenue guidance, and it came in higher than consensus estimates. This suggests new iPhones would ship in September, before Q4 close (because there’s really nothing besides iPhone that could account for the higher Q4 revenue projection). A delay to produce and ship phones before quarter close would therefore have an impact on their Q4 revenues. So even if they haven’t accounced a release date yet, they already have accounted for their internal target date in their revenue guidance.  

    Now, that being said, I think this is still more of a minor inconvenience than a major impact on Apple’s ability to manufacture the new iPhones.  With this coming here in early August, but A12 production having started back in May (at low volumes, no doubt, but probably fully ramped by now), I think the issue wouldn’t affect the launch inventory at all, and that TSMC has time to catch up.  
    GeorgeBMac
  • Reply 9 of 11
    linkmanlinkman Posts: 876member
    mf2k said:
    I'm guessing that "high signal digit" growth was meant to be "single" digit growth. 
    In many places a high signal digit is the middle finger.
  • Reply 10 of 11
    ronnronn Posts: 312member
    damonf said:
    ronn said:
    Much ado about nothing. Apple is so large that either TSMC will make sure there won’t be a delay in production for them or alternatively Apple can just announce a release date that’ll ensure adequate supply. There can’t be a delay when there hasn’t been an announcement for the new lineup. We’re several weeks away from an announcement if we go by previous releases. I suspect the event on September 12 with launch day September 21.
    There would be a realized delay and impact: Apple has already announced their fiscal Q4 revenue guidance, and it came in higher than consensus estimates. This suggests new iPhones would ship in September, before Q4 close (because there’s really nothing besides iPhone that could account for the higher Q4 revenue projection). A delay to produce and ship phones before quarter close would therefore have an impact on their Q4 revenues. So even if they haven’t accounced a release date yet, they already have accounted for their internal target date in their revenue guidance.  

    Now, that being said, I think this is still more of a minor inconvenience than a major impact on Apple’s ability to manufacture the new iPhones.  With this coming here in early August, but A12 production having started back in May (at low volumes, no doubt, but probably fully ramped by now), I think the issue wouldn’t affect the launch inventory at all, and that TSMC has time to catch up.  
    Apple, like other large companies, always bakes in room for any possible issue. I'm sure they've already built in enough time in case there is any delays. With TSMC shooting for total production back on schedule by Tuesday am, there shouldn't be a negative impact. Especially with Apple being so important to their bottom-line and future production being at risk. I suspect Apple won't have to change their internal goal for announcement and releasing the next iPhones.
  • Reply 11 of 11
    gatorguygatorguy Posts: 19,805member

    "Chip-maker TSMC has admitted that an outbreak of the WannaCry virus – linked to North Korea – caused the production outage at a number of its production facilities over the weekend.

    The company admitted the outbreak […] affected unpatched Windows 7 systems running critical processes in its fabrication facilities."

    This despite Microsoft rolling out several security patches to block the virus, some even prior to its appearance in the wild. Unfathomable why TSMC would not have applied the updates when notified. 

    ronnbadmonk
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