iPhone chip supplier TSMC stops its production due to malware attack

Taiwan Semiconductor Manufacturing Co was hit by a malware and shut down its factories

TSMC encountered a malware attach which forced the company to shut down its factories for almost a weekend.

According to the official report, Taiwan Semiconductor Manufacturing Co, also known as TSMC, has encountered a computer virus on their network which led to the shut down of all its factories on Friday^[1]. Fortunately, some of the machines were restored on Saturday while others are believed to start running on late Sunday.

TSMC contained the problem and found a solution. As of 14:00 Taiwan time, about 80% of the company’s impacted tools have been recovered, and the Company expects full recovery on August 6.

TSMC is a sole supplier of SoC elements for Apple products, including iPhones, and iPads^[2]. Likewise, the output has been significantly diminished during the weekend and may lead to delays of new Apple products which should be presented at the press conference in September.

Chief Financial Officer Lora Ho understands that this incident may lead to enormous financial losses and states the following^[3]:

TSMC has been attacked by viruses before, but this is the first time a virus attack has affected our production lines <…>

The malware spread through the company's network

Researchers at TSMC say that the malicious program was not infiltrated to the factories' computing system by a hacker. Instead, the company believes it hit the network during the installation of the new tool which was connected to the company's network^[4]:

This virus outbreak occurred due to misoperation during the software installation process for a new tool, which caused a virus to spread once the tool was connected to the Company’s computer network.

Fortunately, TSMC believes that neither data integrity nor confidential information has been compromised. Although, the representatives do not agree to share the potential decrease in revenue due to this incident and decline to indicate which facilities will be affected.

Malware attack might decrease the revenue by 3-percent

TSMC says that they have already made pre-estimations of the potential damage by the disruption of production in their official report. It is evident that this incident will lead to shipment delays and additional costs. Furthermore, according to the company, this malware attack might result in the 3-percent decrease in revenue^[5]:

TSMC expects this incident to cause shipment delays and additional costs. We estimate the impact to third quarter revenue to be about three percent, and impact to gross margin to be about one percentage point. The Company is confident shipments delayed in third quarter will be recovered in the fourth quarter 2018, and maintains its forecast of high single-digit revenue growth for 2018 in U.S. dollars given on July 19, 2018.