chipageddon redux? climate change threatens copper supply, impacting semiconductors

2025-07-08 general

New York, Tuesday, 8 July 2025.
a new pwc report sends a stark warning: climate change-induced water shortages could slash semiconductor production by nearly a third within a decade. chile, a major copper producer, already faces production slowdowns. this shortage echoes the covid-19 pandemic’s disruptive impact, potentially crippling the ai and ev industries that heavily rely on these chips. the report highlights that half of every country’s copper supply is at risk by 2050, regardless of carbon emission reductions.

looming threats to semiconductor production

The pricewaterhousecoopers (pwc) report highlights a concerning trend for investors in the semiconductor industry [1]. By 2035, approximately 32% of global semiconductor production could be disrupted due to climate change-related copper supply shortages [1][2][6][7]. This is a fourfold increase from current levels, signaling a significant escalation of risk [2][6][7]. Water scarcity in key copper-producing regions is the primary driver, impacting essential processes like smelting and refining [1]. Seventeen countries that supply the chip industry are projected to face high drought risk by 2035, exacerbating the problem [1][2].

chile’s copper vulnerability

Chile, the world’s largest copper producer, is already grappling with severe water shortages that are curtailing mining output [1][2][3][4][6]. Currently, an estimated 25% of chile’s copper production is at risk of disruption [1][2][3][6]. Pwc projects this figure could surge to 75% within the next decade [1][2][3][6]. Alarmingly, by 2050, between 90% and 100% of chilean copper production could be at risk, even under optimistic climate mitigation scenarios [1][2][3][6]. This escalating risk profile necessitates a reassessment of investment strategies in copper mining and related industries.

economic repercussions and market impact

The potential copper shortage poses a significant threat to the global economy. The previous semiconductor shortage, triggered by covid-19, serves as a stark reminder [1][3][6]. Glenn burm, pwc project lead, noted that the chip shortage reduced the us gdp growth by a full percentage point and germany’s by 2.4% [1][3][6]. A copper-driven disruption could be equally, if not more, severe [3]. Investors should anticipate increased volatility in the semiconductor and ev sectors as these industries heavily rely on copper for chip manufacturing [1][3].

industry-wide consequences and mitigation efforts

The impact extends beyond semiconductor manufacturers. Industries reliant on electronics, including electric vehicles and ai systems, face potential setbacks [1]. Copper is essential for printed circuit boards, semiconductor packaging, and power electronics [3]. While alternative materials are being researched, they currently lack copper’s cost-performance ratio [3][4][6]. Chile and peru are proactively addressing water security by enhancing mining efficiency and investing in desalination plants [1][2][3][6]. However, these solutions may not be viable for all copper-producing nations, especially those that are landlocked or have lower incomes [2][3][6].

investment considerations and strategic responses

Investors should closely monitor companies that are proactively mitigating copper supply chain risks. This includes diversifying sourcing, investing in circular economy initiatives for copper recovery, and advocating for climate adaptation infrastructure [3]. Companies that heavily rely on copper and lack proactive risk management strategies may face increased scrutiny and potential devaluation [3]. A pwc report suggests that by 2050, over 50% of copper production in every major producing country will be at risk, underscoring the urgency for strategic adaptation [2]. Prudent investors should factor these long-term vulnerabilities into their investment decisions [2].

Bronnen

copper shortage semiconductor supply