The worst drought in half a century is hitting Taiwan, adding strain to an island that is home to two-thirds of the world semiconductor manufacturing capacity during the worst global chip shortage in recent memory.
The drought’s impact on semiconductor producers, which require voluminous quantities of water to churn out chips, is so far modest as the government creates exceptions for these manufacturers. But companies are starting to make adjustments, and officials have warned that the water shortage could worsen without adequate rainfall.
Taiwan’s semiconductor wafer-fabrication factories, or fabs, account for 65% of global production, according to the research firm TrendForce. Most of that capacity belongs to Taiwan Semiconductor Manufacturing Co., the world’s biggest contract chip maker.
“Taiwan is the center of gravity for semiconductor manufacturing,” said Syed Alam, global lead of the semiconductors practice at Accenture. “This is one thing you don’t need adding more pressure on the situation.”
Seasonal typhoons provide Taiwan with much of its water reserves. But a lack of storms last year has strained supplies, prompting the government to start rationing water for more than a million businesses and residents.
The heightened risk comes as the global chip supply has been battered by a series of natural disasters just as demand for semiconductors has soared from auto makers and electronics companies around the world.
Taiwan’s three science industrial parks, which house most of the island’s chip-making facilities, have had to curb their water intake but are so far exempt from stoppages, which has helped stave off disruptions. Still, some companies are feeling the pinch.
Micron Technology Inc., a U.S. chip maker with Taiwan facilities in Taichung and Taoyuan, said securing alternative sources of water and speeding up conservation would increase production costs after supply to one of its Taiwan-based memory-chip facilities was reduced.
Meantime, TSMC and United Microelectronics Corp., both of which are based in Hsinchu, Taiwan, have arranged for trucks to bring in additional water supplies. TSMC said it is also in talks with some companies to use groundwater from their construction sites.
TSMC chief executive C.C. Wei said last Thursday that while Taiwan water supplies are currently tight, the company doesn’t expect to see any material impact on operations.
Taiwan officials and scholars have warned that water scarcity could become a more persistent problem in the years to come because of climate change, a worrying possibility for the global semiconductor industry given the concentration of chip production in Taiwan.
More than half of Taiwan’s water supply comes from typhoons, said Yuei-An Liou, a professor at the National Central University’s Center for Space and Remote Sensing Research in Taoyuan, Taiwan.
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