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Climate change and Covid threaten the world’s chip factory

The Taiwanese semiconductor industry, which is considered the global chip “factory”, is threatened by both climate change and the Covid epidemic.

Climate change threatens to reduce Taiwan’s important role in the global semiconductor supply chain. In addition, the territory’s chip industry also has to deal with the Covid-19 epidemic.

Taiwan is known as a chip factory, accounting for more than half of the world’s chip production. Due to the current chip supply crisis, companies that produce many items – from washing machines, smartphones to cars – in all countries are scrambling to ensure that they have enough semi-components. -conductors. In such a context, the difficulty of the chip factories in Taiwan should not aggravate this scarcity.

“There is very clear pressure in the semiconductor industry,” Capital Economics chief economist for Asia, Mark Williams, said last week in a report on power shortages and electricity. water, and the number of new Covid-19 infections has risen sharply in Taiwan.

For several months, Taiwan has been hit by its worst drought in 50 years, limiting water supplies. This puts a strain on the chip factories in Taiwan, as chip production is a large water-consuming sector. Taiwan’s largest chip company, Taiwan Semiconductor Manufacturing Company (TSMC), said it uses 156,000 tons of water per day, the equivalent of 60 Olympic swimming pools for production.

Due to the limited supply of the water supply system, TSMC has to use trucks to transport water to factories and increase the use of recycled water. TSMC’s production is still guaranteed so far, the company said. However, if the water shortage persists for a long time, TSMC and other chip makers in Taiwan are unlikely to avoid cutting back on production.

Another worrying issue is that advanced chips are only available to certain vendors, due to the high cost of manufacturing and manufacturing. As a result, production disruptions at these factories would have a global impact. TSMC is the world’s largest contract chip maker and a supplier to partners like Apple, Qualcomm, and Nvidia, who can design their own chips, but don’t have the resources to make them.

“TSMC is a key chip supplier for many companies,” Alan Priestley, vice president of analysis at technology market analysis firm Gartner, told CNN Business. “Most of today’s high-performance electronics, such as cell phones and tablets, use chips made by TSMC. “

The current global shortage of chips stems from a variety of causes, including fluctuations in demand caused by the Covid-19 pandemic, US sanctions against Chinese tech companies, and extreme weather conditions. More and more tech companies report having difficulty securing the supply of semiconductor components. Lack of chips can reduce the production of many technology products, pushing the prices of those products up when they reach consumers, thus increasing the already “hot” inflationary pressure globally.


In addition to the drought, the Taiwanese chip industry is also threatened by the Covid-19 epidemic. As of May, it is the worst Covid outbreak on record in Taiwan. At the start of last month, Taiwan had no Covid-19 infections in the community, but as of mid-May the number of new infections suddenly skyrocketed and by the end of the month it had reached around 600 cases per day. Recently, the number of new infections fell below 300 / day, but authorities and companies remain cautious about the risk of outbreaks in factories.

TSMC last month said two of its employees were diagnosed with Covid-19, but production operations remained normal. Experts say chip factories in Taiwan can control the risk of Covid because the chip production process has a high degree of automation and factories have divided workers into groups to limit the spread of viruses on a large scale.

Despite this, there have been at least five chip factories in southwest Taipei that have been forced to partially shut down production operations due to workers infected with Covid. King Yuan Electronics, a leading provider of chip testing and packaging services, had to shut down for two days after more than 200 workers tested positive for Covid. All migrant workers working for King Yuang, around 30% of the company’s 7,000 workers, were quarantined for two weeks after an outbreak was detected at a worker’s residence.

Biến đổi khí hậu và Covid đe doạ công xưởng chip của thế giới - Ảnh 2.

Baoshan Second Reservoir in northern Taiwan, the water source for factories of TSMC and other chip companies in Hsinchu high-tech park, is currently at 30% of normal water level, despite the rainy season in Taiwan. Photo: CNN.

According to a May report from Capital Economics, April’s data on global chip orders shows that chip factories in Taiwan will continue to operate at full capacity. According to the report, the order volume will continue to exceed Taiwan’s chip exports and the backlog will take some time to resolve.

Figures released by the Taiwanese government last week showed the territory’s exports in May rose 38.6 percent year-on-year to a record high of $ 37.4 billion. This is seen as a sign that Taiwan’s booming demand for computer chips and other exports will not subside anytime soon.


Experts fear that water shortages in Taiwan will worsen in the future. Climate change could cause rainfall to drop in this region over the next decades, leading to more persistent droughts, according to climatology researcher Hsu Huang-hsiung of the Taiwan Academy of Sciences (Academia Sinica).

“Our forecast shows that the drought will become more severe in the future. Therefore, this year is a good opportunity to test the sustainability of Taiwan’s semiconductor industry, ”Hsu told CNN Business.s.

Electrical engineer Jefferey Chiu of the University of Taiwan said such a situation could limit the territory’s ability to develop advanced chips. This is because chip technology is getting more and more sophisticated, forcing manufacturers to use more water in the chemical processes needed to make chips.

Another concern of Taiwan today is the lack of electricity. Higher power consumption by factories, warmer-than-usual weather, and low water levels in hydroelectric reservoirs have resulted in intermittent power outages affecting more than 4 million homes and nearly one million homes across the country. half of Taiwan’s 62 industrial parks. TSMC said the power outage affected some of its factories.

“There is a need to reduce carbon emissions, but also to generate more electricity on the other hand,” Hsu said, saying Taiwanese chip companies need to invest more in renewable energy sources to ensure that they do not have a secure and sustainable future. .

TSMC said it was working to strengthen the electricity supply by partnering with solar power plants and wind farms. Last year, TSMC announced a strategy to use all renewables for generation by 2050.

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