Nvidia Supplier Taiwan Semi Faces Water Shortage Challenge as Chip Production Demand Soars

Taiwan Semiconductor Manufacturing Co TSM and peer semiconductor companies are facing increasing risks of water shortages as they progress to more advanced processing technologies, according to a report by S&P Global Ratings.

Semiconductor manufacturing, essential for producing chips for devices like smartphones and TVs, demands substantial water usage to cool machinery and clean wafer sheets meticulously.

The report highlights a direct correlation between the sophistication of semiconductor chips and water consumption, CNBC reports.

As chipmakers move to more advanced semiconductor nodes, such as TSMC’s shift to 16-nanometer processes, their water use per unit has surged by over 35%.

This growing thirst for ultra-pure water, necessary for rinsing wafers through numerous fabrication steps, poses potential risks to the global tech supply chain, especially considering TSMC’s critical role in producing approximately 90% of the world’s advanced chips for AI and quantum computing.

The report suggests that in the face of water limitations, TSMC and similar companies might prioritize the production of high-margin advanced chips over less profitable mature chips, potentially enhancing earnings despite increased water consumption.

TSMC has made a significant leap in its global expansion by opening its first chip plant in Japan in Kumamoto, a move aimed at diversifying supply chains amid escalating U.S.-China trade tensions.

It has announced further investment in a second fabrication plant in Japan in partnership with Sony Semiconductor Solutions, Toyota, and Denso.

Beyond Japan, TSMC is extending its international presence with a $40 billion investment in Arizona, USA, planning two manufacturing plants to meet the American demand for semiconductors.

The quarterly results of the chip designers bear testimony to the fact that the artificial intelligence frenzy is in no hurry to cool down as U.S. Big Techs keep splurging on their AI ambitions.