Component Sense Blog

Global Chip Maker TSMC Threatened by Taiwan Water Crisis

Global Chip Maker TSMC Threatened by Taiwan Water Crisis

Chip manufacturers in Taiwan, including TSMC, are buying water by the truckload for some of their foundries, as the island widens restrictions on water supply amid a drought that could worsen the global chip crunch.

Taiwan, one of the world's biggest producers of chips, had promised to help the US, Germany and Japan by bridging the shortage of auto chips, but some auto chip makers have already been forced to reduce production.

A key hub in the global technology supply chain for giants such as Apple Inc, Taiwan has started to further reduce water supply for factories in central and southern cities where major science parks are located.

Water levels in several reservoirs in the island's central and southern region stand at less than 20 percent, following a rare typhoon-free summer and months of scarce rainfall. Taiwan usually averages at least three typhoons each year, bringing much-needed rain, but none hit the island in 2020. The average water level of the nation's reservoirs is 1,000 millimetres lower than a year ago, according to the Water Resources Agency.

"Climate change is dynamic and we have to always think ahead for the worst-case scenario. The government has been preparing for this and trying to increase supply since last year but we also need not just the suppliers but everyone in the nation to help conserve water, as the resources are limited and precious," said Lai Chien-hsin, Director-General of the agency.

To keep the tech manufacturing sector running, the Tsai Ing-wen administration started using a new water pipeline on 1st February to draw water from Taoyuan to support Hsinchu. In late 2020, the government also approved an emergency plan to build a desalination plant in less than 70 days to supply more water to Hsinchu. The plant came online last Tuesday.

"We have planned for the worst," Taiwan Economy Minister Wang Mei-hua told reporters earlier this week. "We hope companies can reduce water usage by 7 percent to 11 percent."

With limited rainfall forecast for the months ahead, Taiwan Water Corporation this week said the island has entered the "toughest moment".

TSMC said it needed 156,000 tonnes of water per day, even though it reuses more than 85% of it.

"We are making preparations for our future water demand," TSMC told Reuters, describing the move as a "pressure test".

The chip giant said it has not yet seen any impact on production. Both Vanguard International Semiconductor Corporation and United Microelectronics Corp signed contracts with water trucks and said there was no impact on production.

Vanguard said it has started a drill to truck water to its facilities in the northern city of Hsinchu.

Taiwanese technology companies have long complained about a chronic water shortage, which became more acute after factories expanded production following the Sino-US trade war.