Lora Ho. Picture: BLOOMBERG/MAURICE TSAI
Lora Ho. Picture: BLOOMBERG/MAURICE TSAI

Taipei — Taiwan Semiconductor Manufacturing (TSMC), which makes chips for the iPhone and other devices, detailed its progress in recovering from a debilitating computer virus and warned of delayed shipments and reduced revenue because of the effect on its factories.

The company said that 80% of the fabrication tools affected by a virus outbreak on Friday evening had been restored and that it expects full recovery on Monday. The company said the incident, which came as it ramped up chip making for Apple’s next iPhones, would delay shipments, without specifying which customers would be affected.

The chip maker estimated that third-quarter revenue would decline about 3% and operating margins about one percentage point.

It maintained its 2018 forecast of boosting revenue by high single digits in US dollar terms.

The incident underscores the global nature of the technology industry’s supply chain, in which companies such as Apple and Qualcomm depend on hundreds of suppliers around the world. This is the first time a virus had brought down a TSMC facility, recalling the WannaCry cyberattacks of 2017 that forced corporations around the world to suspend operations as they rooted out the ransomware.

No confidential information had been compromised in the attack and most customers have been notified, the company said.

"TSMC has taken actions to close this security gap and further strengthen security measures," CFO Lora Ho said.

The virus outbreak was due to "misoperation" during the software installation process for a new tool, the company said.

The virus had spread once the tool was connected to the company’s computer network.

The company is the latest to fall prey to a growing global scourge. Cybercrime could cost businesses up to $8-trillion in damage over the next five years, according to the World Economic Forum.

"TSMC has been attacked by viruses before, but this is the first time a virus attack has affected our production lines," Ho said.

The implications are unclear for Apple. The iPhone maker surpassed a market value of $1-trillion last week, largely on the strength of sales for its pioneering smartphone.

In the past the US company has employed foundries owned by Samsung Electronics, its rival in global mobile devices.

The incident comes weeks after TSMC cheered investors with a rosy outlook for smartphone demand in the latter half of the year.

That helped the market look past a reduced revenue outlook.

A bellwether for the chip industry as well as an early indicator of iPhone demand, it heads into its busiest quarters grappling with waning enthusiasm for the high-powered chips used to mine digital currencies.

CEO CC Wei had said the company’s sales would rise by a high single-digit percentage in US dollar terms in 2018, down from an already reduced projection of about 10%.

Bloomberg