How water scarcity threatens Taiwan’s semiconductor industry

Taiwan has developed into the largest chip manufacturer in the world, with the most advanced production facilities in the world. The island produces more than 60 percent of the world’s semiconductors and just under 90 percent of the world’s most advanced chips. Yet, despite its global dominance, the industry has its kryptonite: water.

Chip production is an incredibly water-intensive process. Just think of Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chip manufacturer, with facilities in the Southern Taiwan Science Park alone 99,000 tons water daily. And that’s not even counting the water used by the other facilities across Taiwan.

Semiconductor foundries depend on water for two major purposes: cooling systems and cleaning residues from silicon wafers. The cleaning process in particular requires this “ultrapure” waterwhich is thousands of times cleaner than drinking water and is free of minerals, pollutants or other contaminants that can damage the chips.

This dependence on water exposes a major vulnerability within the global semiconductor industry, especially given 21st century climate trends. By 2030 and 2040, 40 percent of chip factories currently in operation, 24 to 40 percent of factories under construction, and 40 to 49 percent of factories announced since early 2021 will be in areas with high to extremely high risk of water stress. For Taiwan in particular, seasonal droughts could threaten the chip industry’s long-term strength and future expansion, with the island’s already depleted water supply only exacerbating the problem.

In terms of numbers, Taiwan receives enough rainfall to meet current demand. However, the island’s irregular rainfall distribution and steep terrain and rapid currents make collecting and storing rainwater a challenge. In 2005, Taiwan was classified as a country with the 18th lowest freshwater availability per capita among 146 countries.

In early 2021, Taiwan suffered its worst drought since 1964. After a rare summer without typhoons and months of little rain, many of the island’s central and southern reservoirs fell below the surface. 20 percent capacity. The water scarcity was so extreme that it caused disruption as well as chip manufacturers United States, Germany and Japan were dependent on Taiwan for automotive chip supplies during a global chip shortage.

In major chip manufacturing centers throughout Taiwan – including Taoyuan, Taichung, Hsinchu and Miaoli – plants were instructed to reduce water consumption by more than 30% 15 percent. In response, manufacturers including TSMC, Vanguard International Semiconductor Corp. and United Microelectronics Corp., resorted to buying truckloads of water and drilling drought-resistant wells to sustain operations. Unfortunately, these were only temporary solutions, and the problem of water scarcity remains a pressing one.

Early last year, as Taiwan entered the second half of another major dry season, chip production centers in Kaohsiung and Tainan – located on the south side of the island, where droughts are most severe – again reduced nighttime hours. public water pressure in anticipation of a new acute water shortage.

The impact of water stress on Taiwanese chip manufacturers is drastic. Inefficient water supply management can lead to: A decrease of 10 percent in TSMC’s production compared to its 2030 projection. As manufacturing capabilities expand and more complex processes are required to produce advanced chips, chipmakers will only become more hungry for this precious resource.

From 2015 to 2019, TSMC’s total water consumption increased astonishingly 70 percent. By 2036, Taiwan’s total water consumption is expected to be the same 7.3 percent higher than in 2021, creating a daily supply shortage of 680,000 cubic meters. Even during typhoon season, Taiwan will struggle to supply its chip industry with its most prized natural resource. And during dry periods the shortage will be even greater.

To make matters even more alarming, climate change threatens to bring longer and more frequent droughts. Taiwan’s reservoirs rely heavily on summer typhoons to replenish depleted water levels. With fewer typhoons passing through and longer periods without substantial rainfall, reservoirs across the island – and not just in the south – will come under increasing pressure.

According to the Water Resources Agency, the amount of rainwater that Taiwan’s reservoirs have collected so far this year is only 30 to 60 percent of the typical average. Experts predict that by the end of the centurythe number of days without rainfall in central and southern Taiwan could increase by up to 50 percent, while rainfall in the northern reservoirs could decrease by as much as 25 percent.

To tackle this looming problem, Taiwan’s chip makers have taken numerous steps to mitigate the devastating effects of water shortages. TSMC, for example, has pledged to reduce water consumption 30 percent from 2010 levels by 2030 and has significantly increased wastewater recycling at its facilities. In September 2022, the manufacturer even launched its own product water recycling plant at the Southern Taiwan Science Park, which supports nearby chip facilities with 10,000 tons of water every day – a figure expected to rise to 36,000 by 2026.

The Taiwanese government has also stepped up efforts, in addition to fundamental supply constraints on agriculture and industry. They have the construction of new water recycling and desalination plantshas intensified the dredging of reservoirs and strengthened the water pipeline network, which was used during the 2021 crisis to divert water from regions with sufficient water to science parks for chip production.

However, experts argue that these efforts are insufficient and suggest that Taiwan needs a fundamental change in its strategy. Instead of continually exploiting supply to meet the chip industry’s rising demand, Taiwan should do so set demand limits based on actual water availability. In addition, Taiwan should promote drought-tolerant practices and diversify its water sources, especially in the agricultural sector, for which it claims responsibility 70 percent of the island’s water consumption.

It is also in Taiwan’s best interest to implement stricter water pricing policies to address excessive water use. This approach is already proving successful. From January, Taiwan introduced a surcharge on all water consumption above 9,000 cubic meters per month, leading to significant reduction in consumption in the Southern Taiwan Science Park.

Currently Taiwan reservoir levels are almost at full capacity thanks to the typhoon season. However, Taiwan should not be lulled into a false sense of security. The Taiwanese government, agencies and people must continue to implement comprehensive, integrated measures to prepare for prolonged dry seasons and combat insufficient water supplies. Only then can Taiwan’s semiconductor industry continue to maintain its celebrated dominance well into the future.

Ensuring the prosperity of Taiwan’s semiconductor industry is crucial. Its central role in the global value chain gives the island unparalleled strategic influence on the international stage, acting as a deterrent against a possible Chinese invasion. Taiwan must coordinate new water management strategies across the island and do so quickly if it wants to avoid the collapse of its “silicon shield.”