April Rate Hike...
Taiwanese Government Emphasizes "User Pays" Principle
The Taiwanese government has negotiated with TSMC, the world's largest semiconductor foundry and a major electricity consumer (特大戶), to increase electricity rates by more than 10% starting in April, according to a report by the Taiwan Liberty Times on the 12th.
Guo Zhuhui, Taiwan's Minister of Economic Affairs, recently stated in an interview that electricity prices for general residential use will basically not increase, but for large-scale electricity users, if they agree to the adjustment based on the "user pays" principle, the Electricity Rate Review Committee will decide on the adjustment plan.
According to TSMC's "2023 Sustainability Report," TSMC's energy consumption in 2023 was 24.775 billion kWh, an increase of more than 10% compared to 2022. This accounts for about 8.96% of Taiwan's total electricity consumption and 16.2% of the total electricity consumption in Taiwan's industrial sector.
Last year, TSMC recorded a record-high revenue of 2.8943 trillion New Taiwan Dollars, with advanced processes of 3, 5, and 7 nm (nanometers, one billionth of a meter) accounting for 70% of the revenue. All of these processes use extreme ultraviolet (EUV) lithography equipment, which consumes a large amount of electricity. This year, with an expected 20% growth in revenue and the start of mass production of 2 nm processes, the industry anticipates that TSMC's electricity consumption will increase further as advanced processes expand.
The Liberty Times reported that the Taiwanese government has been communicating with major semiconductor companies with high electricity usage, such as TSMC and UMC, since early this year regarding issues like electricity rate increases. In particular, it is reported that TSMC is expected to raise electricity rates by at least 10% starting in April as a result of the negotiations.
TSMC did not respond to inquiries regarding the electricity rate increase. However, the Taiwanese industry believes that since TSMC's annual revenue exceeds 1 trillion New Taiwan Dollars, the impact of the electricity rate increase on its performance will not be significant, but mature process companies or those operating at a loss will face increased pressure, according to the Liberty Times.
This is not the first time electricity rates have been raised for large-scale electricity users. Already in April last year, electricity rates were increased by 15-25% for about ten companies that met the conditions of increased electricity consumption for two consecutive years and an annual electricity usage of over 5 billion kWh. TSMC is the only company in Taiwan with an annual usage exceeding 15 billion kWh, corresponding to a 25% electricity rate increase.
Meanwhile, when asked whether the Taiwan Power Company spokesperson would communicate again with TSMC before next month's Electricity Rate Review Committee meeting, the spokesperson replied, "I do not know."
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