[Chiptalk] Dry Public Sentiment Amid Water Shortage... TSMC Faces Growing Concerns Over Water Supply

World's Largest Foundry Company Waging 'War on Water'
Third Factory in Taichung, Taiwan, Struggles to Gain Approval Amid Local Opposition
Taiwan Government Supports Considering Economy and Security, Faces Backlash Over "Unsustainable Support"

The world's largest foundry (semiconductor contract manufacturing) company, TSMC, is struggling with securing industrial water in its home base, Taiwan. Backed by the absolute support of the Taiwanese government, TSMC has been drawing water for years, causing local residents to suffer from a shortage of domestic water and fiercely oppose it, deepening TSMC's dilemma as it seeks to expand its supply chain.

[Image source=Reuters Yonhap News]

Considering the national economy and security, the central government of Taiwan is currently supporting TSMC. However, as climate change intensifies weather anomalies and water shortages among local residents emerge as a serious social issue, there are also criticisms that it is not easy to unilaterally push forward the semiconductor business.

According to the Washington Post (WP) on the 15th (local time), TSMC received approval from the local government of Taichung in central Taiwan last August to build its third local factory. This approval was barely obtained after several months of controversy locally since the proposal was submitted last year. Due to delays in the approval process, TSMC initially planned to establish a 2nm (1nm = one billionth of a meter) next-generation advanced semiconductor process at the Taichung factory but reportedly moved it to the Kaohsiung fab.

The reason for the delay in local government approval for factory construction was precisely the opposition from local residents. When a semiconductor factory is established, a large amount of industrial water and electricity is consumed nearby. In a situation where the total regional water supply is limited, farms near the factory inevitably face significant difficulties in securing agricultural water or electricity. The Taichung government estimated that TSMC would consume about one-quarter of the city's total electricity and about 6% of the water at the third factory alone. Lee Cheng-wei, head of Taichung's Urban Development Department, told WP, "There was great concern about having to pour water and electricity into industrial development."

WP evaluated, "It is not easy to shout 'NIMBY' (Not In My Backyard, a strong opposition to hazardous or undesirable facilities being built in one's area) against one of the world's most valuable factories (TSMC factory). Yet, the residents of Taichung tried to do so."

TSMC's conflicts with local residents over water issues are not limited to this year. Every year when Taiwan suffers from drought, TSMC's water usage becomes a focus. The global semiconductor industry has also worried that Taiwan's drought might lead to production disruptions at TSMC. Each time, the central government of Taiwan has stepped in with various policies to support TSMC. This is because TSMC's importance is significant not only for the national economy but also for security.

Especially during Taiwan's worst drought in 100 years in 2021, agricultural water used for rice paddies was diverted to TSMC, and the government took measures to prevent domestic farmers from planting rice and provided subsidies to compensate for losses. Irrigation facilities supplying water to farmland were also shut down. According to the New York Times (NYT), the area of farmland affected by the suspension of irrigation facilities exceeded 180,000 acres.

Local governments and environmental groups in Taiwan, where TSMC factories are located, have expressed concerns that similar incidents have been repeated for years. Chao Hui-lin, a researcher at the Taiwanese nonprofit Air Clean Taiwan, pointed out, "The government's policy is to give them (TSMC) whatever they want, including land and electricity," adding, "This is unsustainable." She added, "We love TSMC, but this is not the right way to love."

TSMC publicly promotes water conservation by reusing industrial water once used. The amount of water saved last year was 3 million tons, but considering that TSMC used 105 million tons of water across all factories in Taiwan, WP pointed out that this is a very small portion. Most of the water was secured from local reservoirs and other sources.

Efforts to secure water continue not only in Taiwan but also in overseas factories such as those in Arizona, USA, and Kumamoto, Japan. Reports have emerged that in Arizona, TSMC has to compete for water with Intel, which is building another semiconductor factory. With the water level of the Colorado River, which passes through Arizona and other states, dropping sharply, concerns about drought are also high in the United States. In Japan, the aging water supply infrastructure makes water supply difficult, and there are concerns that "the biggest risk for the TSMC semiconductor factory starting mass production in 2024 is water shortage."