Officials in Taiwan are concerned that a severe outbreak of Covid-19 will jeopardize the island’s vital role in the global semiconductor supply chain. However, experts fear that another threat to the industry, the climate crisis, will have even more severe consequences.
Taiwan, which produces more than half of the world’s chips, has been suffering from its worst drought in more than 50 years for months, an occurrence that experts believe will become more common as a result of climate change.
“The semiconductor industry is clearly under pressure,” wrote Mark Williams, chief Asia economist at Capital Economics, in a note on Thursday, citing water shortages, coronavirus cases, and rolling power outages.
Manufacturers all over the world have already experienced difficulties obtaining semiconductor supplies, delaying production and delivery of goods. Given Taiwan’s importance in contributing to global chip supply, the situation could get much worse if the island is hit hard.
The island’s chipmakers, including industry leader Taiwan Semiconductor Manufacturing Company, have already faced challenges as a result of the environmental disaster (TSM). TSMC claims to use 156,000 tons of water per day to make its chips, which is roughly the equivalent of 60 Olympic-size swimming pools.
Water is used to clean the dozens of metal layers that make up a semiconductor.
“In a chip, there are lots of billions of transistors, and we need a lot of metal layers to interconnect all the signals,” said Jefferey Chiu, an electrical engineer at National Taiwan University.
“We have to clean the surface again and again after every process is finished,” Chiu said.
The island’s chipmakers, including industry leader Taiwan Semiconductor Manufacturing Company, have already faced challenges as a result of the environmental disaster (TSM). TSMC claims to use 156,000 tons of water per day to make its chips, which is roughly the equivalent of 60 Olympic-size swimming pools.
Water is used to clean the dozens of metal layers that make up a semiconductor.
“In a chip, there are lots of billions of transistors, and we need a lot of metal layers to interconnect all the signals,” said Jefferey Chiu, an electrical engineer at National Taiwan University.
“We have to clean the surface again and again after every process is finished,” Chiu said.
In response to the drought, Taiwanese authorities have limited the availability of tap water across the island.
TSMC has already taken steps to alleviate the shortage, such as bringing in water and increasing recycling rates. According to CNN Business, the company’s production has been unaffected so far.
“We have detailed response procedures to handle water shortages at different stages,” it said. “Through our existing water conservation measures, we are able to manage the current water usage reduction requirements from the government, with no impact on our operations.”
Semiconductor chips are found in everything from smartphones to automobiles to washing machines.
Because super advanced chips are difficult to develop and manufacture due to the high cost of development and the knowledge required, much of the production is concentrated among only a few suppliers.
TSMC is the world’s largest contract chip manufacturer, and its high-cost manufacturing facilities supply many companies that can design their own chips but lack the resources to produce them, such as Apple (AAPL), Qualcomm (QCOM), and Nvidia (NVDA).
The Taiwanese firm’s cutting-edge technology has also elevated it to a key player in the US-China competition to develop advanced technologies of the future, such as artificial intelligence, 5G, and cloud computing.
“TSMC is key to many different companies,” said Alan Priestley, vice president analyst for Gartner. “Most of the high-performance electronics you are using today — like cell phones and tablets — all those chips are made by the TSMC.”
Right now, the global semiconductor industry is under a lot of stress. Chips have been in short supply recently, owing to fluctuating demand brought on by the pandemic, US sanctions against Chinese technology firms, and extreme weather. A growing number of technology companies have reported difficulties obtaining semiconductors, which analysts believe could cause production delays or raise consumer prices.
That makes containing any threat to Taiwan’s production all the more critical.
Apart from the drought, officials have expressed concern about the coronavirus outbreak on the self-governing island, which began last month and has since escalated to its worst level since the pandemic began.
Last month, James Lee, director general of the Taipei Cultural and Economic Office in New York, told Bloomberg that the industry might face “logistical problems” as he pleaded with the US to ship vaccines to Taiwan.
