Thirsty Work: TSMC Starts Trucking In Water Amid Taiwan Drought To Keep Chip Production Lines Chugging

As Taiwan grapples with a major drought, local chipmaker TSMC has started ordering water by the truckload to supply its fabrication plants.

TSMC, which accounted for over half of all contract foundry revenue in 2020, told Reuters it is preparing for "future demand" which the local water supply may not be able to satisfy. It added the current dry conditions had not yet affected production.

Taiwan has historically seen three or four typhoons per year. Since 2010, this figure has dropped to 2.5 per year. In 2020, for the first time in almost half a century, no typhoons made landfall on the tiny island. While tropical storms are often responsible for immense property damage and loss of life (in 2010, Typhoon Fanpai killed five Taiwanese residents and caused around $158m in damage), they also help to replenish reservoirs.

According to Taiwan's Water Resource Agency, many of the country's reservoirs are operating at a dangerously low capacity. The Second Baoshan Reservoir, for example, which serves the city of Hsinchu, where TSMC has its main base of operations, is operating at a 14.62 per cent storage ratio. This has prompted the government to ask companies to conserve water where possible.

Semiconductor manufacturing is a notoriously thirsty process. A single manufacturing plant can use between two to four million gallons of water per day. This must be purified before use to remove potential contaminants and stray mineral ions. Compounding the environmental impact further, the wastewater produced is a highly toxic slurry, often packed with high quantities of hydrofluoric acid and excessive metal ions. Before this can be returned to the water supply, or used again by the foundry, it must go through a rigorous recycling process.

This dependence on water has prompted some semiconductor firms to invest in recycling and purification projects. South Korean memory giant SK Hynix raised a $1bn "green bond" earlier this year.

There are genuine fears that Taiwan's water woes could disrupt chip production, and cause ripple effects further down the supply chain. The automotive industry is especially exposed, with consulting firm AlixPartners forecasting the sector may lose $60.6bn in revenue this year due to limited production. Separately, Sony has said the shortage will hamper its ability to ramp up production of the PlayStation 5 to meet consumer demand.

This isn't the only climate catastrophe to hit the semiconductor sector this year. Earlier this month, freak winter conditions in Texas caused widespread power outages, resulting in halted production at plants operated by Samsung and NXP. ®