water scarcity threatens global chip supply
Hsinchu, Thursday, 5 December 2024.
Semiconductor manufacturers, including TSMC, face increased risks due to water shortages in key production areas. The industry, heavily reliant on water, is underestimating the long-term impact of water scarcity. In regions like Arizona, water stress is already affecting production capabilities. Rising costs associated with water treatment and stricter government regulations add further pressure. If unaddressed, these issues could disrupt global supply chains, impacting electronic product availability worldwide. Investment firms like BlackRock emphasize that many companies have not adequately considered these risks. The urgent need for improved water management and recycling technologies is clear as companies seek to mitigate potential disruptions in production. TSMC’s expansion into Japan highlights efforts to diversify manufacturing locations and manage water-related risks. The global water crisis demands immediate action from the semiconductor industry to ensure sustainable operations and prevent significant supply chain disturbances in the future.
Investment risks escalate
Fund managers warn that semiconductor companies are significantly underestimating water-related risks to their operations [1]. BlackRock, a leading investment firm, highlights that many companies, particularly those in drought-prone areas, have not fully assessed the potential impact of water scarcity on their business [1]. This oversight could lead to substantial operational disruptions and increased compliance costs [1], potentially affecting investor returns and market valuations.
TSMC’s strategic response
TSMC is actively addressing water risks through geographical diversification of its manufacturing facilities [3]. The company’s expansion into Japan represents a strategic move to mitigate water-related operational risks [3]. However, TSMC’s Arizona operations face significant challenges, with local water scarcity threatening production capabilities [3]. The combination of labor disputes and environmental concerns has created additional complications for TSMC’s U.S. expansion plans [3].
Global industry support
Governments worldwide are implementing measures to support semiconductor manufacturing despite environmental challenges. The U.S. has committed $52.7 billion through the CHIPS Act [5], while the EU has allocated $42.3 billion through 2030 [5]. Japan has provided $6.8 billion in domestic semiconductor funding [5], demonstrating global recognition of the industry’s strategic importance despite resource constraints.