Chip manufacturing consumes so much water that TSMC’s new U.S. factory may start a water war

April 3 news, according to Barron's Financial Weekly (Barron's), semiconductors are one of the key resources in the 21st century, and major powers are investing heavily in ensuring that their countries have more chip manufacturing capabilities. However, this competition also faces the problem of the world's oldest key resource - water, because manufacturing chips requires a large amount of water.

It is understood that Taiwan, the global chip production center, suffered the worst drought in half a century in 2021. At that time, TSMC had to use trucks to transport water to ensure the normal operation of the wafer factory. Water conditions are likely to be even more severe this year. A report by the Asia Pacific Foundation of Canada points out that only a quarter of the water storage capacity in Taiwan's major reservoirs is left, and "water rationing" has become the new normal.

Taiwan is located in a subtropical region, where monsoons bring rain all year round. However, even so, Taiwan will still face water shortages. The weather in northern Phoenix, where TSMC's new factory is located in the United States, is drier than in Taiwan. Phoenix officials estimate that if TSMC builds six fabs there, it could require 493.3 million cubic meters of water per year, enough to supply 160,000 homes.

About 40 percent of Phoenix's water comes from the Colorado River, said Sorenson, a former Phoenix Water Company executive who heads the research department at the Kyl Water Policy Center. The river flows through seven U.S. states (Arizona is the last), and these states have competed for water for hundreds of years. After 20 years of drought, the river is now 40% below target.

From this point of view, TSMC and its competitor Intel, which also has a factory nearby, may not only compete for the market, but also for water.

About 70% of the water in the Colorado River is used for agriculture, and these farmers can obtain water allocations at reasonable prices. Stapleton, an attorney with the Native American Rights Foundation, pointed out that at least 29 Native tribes have water rights claims in the Colorado Basin.

Therefore, Baron believes that for TSMC, Phoenix’s “water politics” is more complicated than the situation in Taiwan.