Taiwan’s Drought In 50 Years Is Latest Curse On Global Chip Supply

More problems for the global supply of semiconductors. The global shortage due to the lack of production capacity to meet the demand for goods that require chips unleashed in the pandemic could be further aggravated as a result of the drought experienced by Taiwan, the world’s largest producer, which has led the Government to restrict the use of water, an essential natural resource for the manufacture of this omnipresent element.

Taiwan, which accounts for more than half of the world’s chip production, has been grappling with its worst drought in more than 50 years for months . And climate change only promises to happen more and more frequently. But how does water scarcity influence the chip supply chain?

Water is needed to clean the dozens of layers of metal that make up a semiconductor. “On a chip, there are many billions of transistors and we need many layers of metal to interconnect all the signals,” Jefferey Chiu, an electrical engineer at National Taiwan University , told CNN Business . “We have to clean the surface over and over again after each process is finished.”

And there is little water that is needed. As recognized by the Taiwan Semiconductor Manufacturing Company (TSMC), a world leader in this industry, it uses 156,000 tons of water per day in the production of its chips. About 60 Olympic swimming pools.

With the current level of drought, the Taiwanese authorities have limited the supply of tap water throughout the island. To overcome this limitation, the company is transporting water in trucks and increasing the recycling rates of the natural good that is in short supply and, for the moment, production has not been affected, as confirmed by that medium.

In addition to the dent that would mean that Taiwan produced fewer chips (a necessary element in technology but also present in household appliances, for example), the fact that the country were forced to reduce production would be further affected by the specialization in super advanced chips that not all make given the difficulty and high cost involved. For this reason, much of its production is concentrated among a handful of suppliers.

While the US and China compete to be the best in artificial intelligence or 5G, TSMC, which supplies giants such as Apple, Qualcomm or Nvidia, has become a key player in this cutting-edge semiconductor technology and most electronic devices carry your chips.

… and we must not forget the covid
But in addition to the drought, there is another factor that threatens Taiwan. Since it broke out last month, the covid-19 outbreak has progressed uncontrollably and has led the country to record the worst data since the pandemic broke out.

As early as May, James Lee, director general of the Taipei Economic and Cultural Office in New York, warned in an interview on Bloomberg that the industry could face more “logistical problems” from a lack of vaccines in Taiwan, and appealed to the international community to send doses and to be able to control the outbreak.

Last month, two TSMC workers tested positive, although in this case operations would not have been affected either. Keep in mind that these types of companies will probably be able to mitigate risks because the chip manufacturing process is highly automated and it is easy to make groups of workers to make transmission or contacts difficult.

Not all Taipei-based semiconductor manufacturers have been so lucky. At least five companies have had to suspend some operations due to the virus. One of them, King Yuan Electronics. The leading semiconductor testing provider was forced to suspend business two days after becoming infected with 200 workers and had to quarantine 30% of its 7,000 employees for two weeks, according to the Taiwan Central News Agency.

Now it’s time to trust that the number of orders will go down, although experts warn that the accumulation “will take a while to clear.” From TSCM they believe that the shortage will last until 2022 .

Drought and covid add to blackouts caused by growing demand for electricity in Taiwan, which have also affected semiconductor production. As a futures solution, TSMC is trying to shore up its energy supply by partnering with solar plants and wind farms across the island. Last year, it said it intends to boost its production entirely through renewable energy by 2050.