Semiconductor firms like Taiwan Semiconductor Manufacturing Company (TSMC) are facing a looming risk of water shortages due to the advancement in processing technology. The chip manufacturing industry, driven by companies like TSMC, plays a vital role in producing semiconductor chips that power everyday consumer devices such as smartphones and TVs. As these companies strive to keep up with the demand for more advanced processors, their water consumption continues to rise significantly.
Water-Intensive Processes
The semiconductor industry is notorious for its water-intensive processes, with factories requiring vast amounts of water daily to cool machinery and maintain the cleanliness of wafer sheets. This need for water is directly linked to the sophistication of the chips being produced, as ultrapure water is used in rinsing wafers between each process. Therefore, the more advanced the semiconductor, the higher the number of process steps, and consequently, the more water consumed.
TSMC, being the world’s largest contract chipmaker, has experienced a notable increase in water consumption per unit following its transition to the 16-nanometer process nodes in 2015. This shift to more advanced nodes has led to a surge in fabrication processes, resulting in a substantial uptick in water usage. The potential water-related disruptions in TSMC’s operations could have significant implications for the global tech supply chain due to its dominance in advanced chipmaking.
Financial Resilience of TSMC
Despite the challenges posed by water shortages, TSMC’s dominance in the semiconductor industry allows the company to lock in end demand and offset lower unit sales through price adjustments. The firm’s ability to maintain its technological leadership could help mitigate the impact of output volatility on its business profile and profitability. Additionally, TSMC’s strategic focus on producing more advanced chips, rather than lower-margin mature chips, during water scarcity could potentially boost its earnings.
The report highlights that water consumption in the semiconductor industry is projected to increase annually by a mid to high-single-digit percentage. This escalation is attributed to capacity expansion and the evolving requirements of advancing process technology. Semiconductor companies worldwide already consume water at a scale comparable to that of a densely populated city like Hong Kong. The mishandling of water resources could lead to operational disruptions, financial setbacks, and strained customer relationships for semiconductor firms in the future.
Leave a Reply