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gloved
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holding
detail
microchip
Wong
Yu
Liang
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Semiconductor
firms
such
as
Taiwan
Semiconductor
Manufacturing
Company
are
at
risk
of
water
shortages
as
processing
technology
advances,
S&P
Global
Ratings
said
in
a
report.
Semiconductor
chips
are
found
in
everyday
consumer
devices
from
smartphones
to
TVs.
TSMC
is
the
world’s
largest
contract
chipmaker
and
manufactures
the
most
advanced
processors
for
companies
like
Nvidia
and
Apple.
The
chip
making
industry
is
a
thirsty
one,
as
factories
consume
vast
amounts
of
water
every
day to
cool
machinery
and
ensure
wafer
sheets
are
free
of
dust
or
debris.
“There
is
a
direct
line
between
water
use
and
chip
sophistication,
as
fabs
use
ultrapure
water
—
fresh
water
processed
to
extremely
high
purity
—
to
rinse
wafers
between
each
process.
The
more
advanced
the
semiconductor,
the
more
process
steps,
the
more
water
consumed,”
said
S&P
Global
Ratings
credit
analyst
Hins
Li.
TSMC’s
water
consumption
per
unit
grew
over
35%
after
it
advanced
to
16-nanometer
process
nodes
in
2015,
data
from
S&P
revealed.
“We
believe
this
was
mainly
due
to
the
migration
to
advanced
nodes,
which
require
more
fabrication
processes,”
S&P
said.
“Given
TSMC’s
dominance
in
advanced
chipmaking,
potential
water-related
disruptions
to
operations
could
disrupt
the
global
tech
supply
chain.”
watch
now
But
the
credit
ratings
firm
noted
TSMC’s
dominance
allows
the
chip
giant
to
“lock
in
end
demand
and
compensate
for
lower
unit
sales
with
price
rises.”
“Should
the
company
be
able
to
maintain
its
technology
leadership,
the
impact
on
TSMC’s
business
profile
and
profitability
from
any
output
volatility
is
likely
manageable,”
said
S&P.
The
Taiwanese
chip
giant
makes
around
90%
of
the
world’s
advanced
chips
that
are
used
for
AI
and
quantum
computing
applications.
TSMC
could
also
focus
on
producing
more
advanced
chips
over
typically
lower-margin
mature
chips
when
there
is
a
limited
water
supply,
which
S&P
said
could
boost
earnings.
The
report
noted
that
water
consumption
in
the
semiconductor
industry
is
on
track
to
increase
by
a
mid-
to
high-single-digit
percent
each
year,
driven
by
capacity
expansion
and
the
demands
of
advancing
process
technology.
The
world’s
chipmakers
already
consume
as
much
water
as
Hong
Kong,
a
city
with
a
population
of
7.5
million,
said
S&P.
“Water
security
will
be
an
increasingly
important
factor
to
semiconductor
firms’
credit
profiles.
Mishandling
of
water
resources
could
disrupt
a
firm’s
operations,
hurt
financial
performance,
and
potentially
hit
customer
relationships,”
said
Li.
“Meanwhile,
climate
change
is
raising
the
rate
of
extreme
weather,
the
frequency
of
drought,
and
the
volatility
of
precipitation,
limiting
chipmakers’
ability
to
manage
production
stability.”
