Taiwan Chipmaker Back Online After Outbreak of Suspected North Korean Virus

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), a major supplier of core processors to iPhones, said full operations have resumed after a virus outbreak shut down some of its major production facilities over the weekend.

The attack will cause wafer shipment delays in the third quarter, and over the same period reduce revenue by no more than 2% and cut the gross profit margin by around 1 percentage point, TSMC said in a statement Monday.

Based on the company’s earlier estimation of third-quarter revenue of $8.45 billion to $8.55 billion, losses will amount to as much as $170 million. TSMC is the world’s largest contract chipmaker, counting Apple Inc., Advanced Micro Devices Inc., Qualcomm Inc. and Nvidia Corp. among its customers.

TSMC said it is confident the delayed shipments “will be completely recovered” in the fourth quarter and that it maintains its forecast of high single-digit revenue growth for 2018.

It stated that it wasn’t the target of a hacking attack and that neither data integrity nor confidential information was compromised.

The infection happened on Friday evening when new software was installed on the company’s network without a prior virus scan, leading to a variant of the WannaCry ransomware to infect facilities in the Taiwan cities of Tainan, Hsinchu and Taichung.

The term ransomware is used to describe a virus that threatens to either reveal or perpetually block access to a victim’s data unless a ransom is paid, although in this case TSMC said that no ransom was demanded.

TSMC recovered 80% of its affected tools by Sunday afternoon and production resumed Monday.

WannaCry, which is suspected to have originated in North Korea, began affecting computer networks around the world in May 2017, hitting companies such as FedEx Corp. and French carmaker Renault SA and causing trouble for Russia’s Ministry of Internal Affairs and to U.K. hospitals, Bloomberg reported.

The Taiwan semiconductor giant produces the A11 processor embedded in the iPhone X. CNBC reported that TSMC is currently working on the next-generation A12 processor expected to be in the three new iPhone models scheduled for release later this year. But analysts said the attack was on a minor scale and wouldn’t affect iPhone productions.

“The incident offers TSMC a valuable lesson,” said Szeho Ng, an analyst with China Renaissance Securities, in a note Monday. “It will certainly put more resources on IT security in its smart manufacturing/industry 4.0 era.”

In the wake of the attack, TSMC said it will continue to “keep abreast of computer virus trends, immediately perform appropriate antivirus measures in its fabs (manufacturing facilities), and further strengthen information security.”

Contact reporter Jason Tan (jasontan@caixin.com)