Making chips requires lots of water and, gulp, Taiwan has a drought


Turns out, semiconductor manufacturing doesn’t just require multi-billion dollar factories and a lot of smarts, it also takes water. Gallons and gallons of it for every single chip. Better hope there’s no drought.

Oops, too late.

Just as world leaders, and auto companies, start to panic about a shortage of components, the global center of chipmaking is facing water restrictions that could impact Taiwan’s most important export. Not only is this 500 kilometer stretch of land at the edge of the Pacific home to now-famous Taiwan Semiconductor Manufacturing Co., but it also hosts factories run by Micron Technology Inc., United Microelectronics Corp., Vanguard International Semiconductor Co. and many more. They all make chips that go into everyday products like smartphones, games consoles and cars.

In addition to dozens of earthquakes, Taiwan is subject to a handful of typhoons every year. These storms, known elsewhere as hurricanes, can be super destructive, causing floods and power outages. But they do have the upside of dumping tons of water into Taiwan’s reservoirs, typically during the months of June through September.

Fortunately and unfortunately, no such storms made landfall last year and the impact is being felt right now, during Taiwan’s driest season.

TSMC and the Taiwan government know that this is a problem. On Thursday, the Water Resources Agency announced a cut in industrial water usage by up to 11% in selected areas. Stricter rationing could come if rainfall doesn’t arrive soon.

According to my analysis of climate data from two dozen weather stations, rainfall in central Taiwan during the six months through January was on average a mere 49% of the mean figure for the past 20 years. In southern Taiwan, it was around 79%. Paradoxically, northern Taiwan saw rainfall slightly above average. TSMC has factories spread across the three regions.

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This has had a huge impact on water stores. A look at reservoirs in central and southern Taiwan indicates that water levels are down to around 41% of capacity, with the island’s third-largest — Tsengwen — now at just 15%.

Exacerbating the problem is the fact that demand for water isn’t drying up.

Chipmakers use the world’s most ubiquitous liquid to clean wafers throughout the production process, as well as keep factories and the air inside them clean. In 2019, the latest year for which data is available, TSMC’s daily water consumption in Taiwan was 156,000 tons per day. At its northern production sites, the company accounted for 10.3% of that region’s daily supply.

Data from TSMC indicates that shipments of wafers — a metric used to measure volume of output — climbed 23% last year. Furthermore, the volume of water required per unit keeps trending up. The amount consumed for each layer of wafer manufacturing climbed 33% between 2015 and 2019to 59 liters apiece. If chips get more complicated with further layers, then water usage could continue to climb.

Publicly, TSMC doesn’t appear worried. It has already started trucking in water, ostensibly to practice for a true shortage — but that can provide only around 20 tons per delivery. The company has contingency plans that include storing two days of water usage capacity at each factory and preparing tankers and other sources that can provide 20% of supplies should the strictest restrictions be implemented.

It also proudly reports that in 2019 it saved 3.28 million tons through conservation and recycling — that’s an impressive figure, except that it consumed around 58 million tons that year. A new reclamation facility to be brought online in the coming 12 months will further boost conservation, but the reality is that the major source of water will be that which falls from the sky.

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Taiwan and its famous semiconductor industry have survived earthquakes, droughts and even power outages. And it’ll probably survive this crisis, too. But just to be sure, political leaders and industry executives might want to take a few minutes to pray for rain.

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