According to a report by S&P Global Ratings, semiconductor companies like Taiwan Semiconductor Manufacturing Company (TSMC) are facing potential water shortage risks with the advancement of processing technology.
Semiconductor chips, crucial components in devices from smartphones to TVs, are produced by companies such as TSMC, the world's leading contract chipmaker known for manufacturing cutting-edge processors for major tech companies like Nvidia and Apple.
The production process for chips is notably water-intensive, with factories consuming significant amounts of water daily for cooling machinery and maintaining clean wafer sheets free from contaminants like dust. The sophistication of semiconductor chips directly correlates to water usage, as advanced fabrication processes necessitate ultrapure water for rinsing wafers between stages. As semiconductor technology advances, more water is consumed due to the increased number of processing steps involved.
S&P data reveals that TSMC experienced a 35% growth in water consumption per unit when it transitioned to the 16-nanometer process nodes in 2015.
Despite the water challenges, S&P recognizes TSMC's industry dominance, enabling the company to adjust pricing and maintain demand stability even with potential disruptions in operations due to water-related issues.
TSMC's focus on advanced chip manufacturing, crucial for applications like AI and quantum computing, allows the company to potentially boost earnings by prioritizing these higher-margin products during periods of limited water supply.
The semiconductor industry is projected to witness a mid- to high-single-digit percentage increase in water usage annually, driven by capacity expansions and technological advancements.
The report emphasizes the importance of water security for semiconductor companies' credit profiles, warning that mismanagement of water resources could lead to operational disruptions, financial setbacks, and strained customer relationships. Furthermore, the impact of climate change, including extreme weather events, droughts, and precipitation volatility, adds complexity to semiconductor production stability management.
