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July 14, 2021updated 22 Jun 2022 11:36am

The environmental impact of chip making needs closer scrutiny

Leading semiconductor manufacturer TSMC failed to meet key sustainability targets last year. Pressure from regulators and customers is needed to make the industry greener.

By Matthew Gooding

TSMC, the world’s largest semiconductor manufacturing company, has revealed it missed key sustainability targets in 2020, as the amount of natural resources its factories used increased to cope with the surging demand for chips. With output at foundries, or fabs, around the world set to increase dramatically in the coming years to cope with this growing demand, the industry’s environmental impact is likely to come into the spotlight.

chip making and sustainability

Semiconductor manufacturing uses a lot of water and power resources. (Photo by Macro Photo/Shutterstock)

In its latest corporate sustainability report, Taiwan-based TSMC revealed its daily water use grew 25% last year, to 193,000 tonnes per day, as revenue grew 30%. Although this means a per-wafer drop in water usage of 8.9%, it still represents a dramatic increase in real terms at a time when Taiwan is coming to terms with its worst drought for 50 years – and falls short of the company’s annual 10% reduction target. TSMC also failed to meet its target for cutting the amount of waste produced by its factories.

What is the environmental impact of chip making?

Water is central to the semiconductor manufacturing process. Chips are built by adding different layers onto a base silicon wafer, and after each layer is added it has to be cleaned extensively using high volumes of ultra-pure water, which is thousands of times cleaner than normal drinking water.

Because of this, TSMC is not alone in facing challenges around its water consumption. US chipmaker Intel’s 2020 sustainability report shows that it used the equivalent 161,000 tonnes of water a day last year.

TSMC's water consumption has been brought into focus by the severe drought in Taiwan. Typically one of the rainiest countries in Asia, Taiwan was not hit by any typhoons in 2020, and as a result, water levels in its reservoirs are low. The BBC reported in April that the Baoshan No. 2 Reservoir in Hsinchu, the province where much of Taiwan's chip manufacturing takes place, is just 7% full.

Heavy rain in May and June has eased the immediate pressure, but the chip makers around the world are focusing on their water use. TSMC is building a plant which will take industrial wastewater and treat it so it is suitable for reuse in semiconductor manufacturing. The company hopes this will come online by the end of the year and could eventually meet about 50% of its daily water needs. Intel and Samsung also say they are making strides in saving water through recycling and better management of resources. "The [chip manufacturers] water recycling is getting better," says Risto Puhakka, president of VLSI Research. "They're recycling more and more and it's something which is manageable for the companies to deal with."

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Puhakka says water usage will remain high on the agenda for the chip makers as new fabs are developed. Both TSMC and Intel have plans for new factories in Arizona in the US to address the problems caused by the global chip shortage. "There are a lot of questions raised by the focus on Arizona as the new hotbed of chipmaking," he explains. "It's not a place which is known for its plentiful supply of water, so the manufacturers are going to need strong recycling plans in place or there'll be no water left in the Colorado River in a few years."

Processes are getting more complex, and this requires greater power intensity. They can try and mitigate this by using more renewables but it is a problem.
Risto Puhakka, VLSI Research

More problematic for the chip makers, says Puhakka, is their growing power consumption. TSMC used 16,900GW/h of energy in 2020, up 19% on the previous year, with renewable sources only accounting for 7.6% of this. The company says the advanced lithography machines used in the manufacturing process of leading-edge chips, which are supplied by Dutch company ASML, are ten times more power-intensive than previous models. "Processes are getting more complex, and this requires greater power intensity," says Puhakka. "They can try and mitigate this by using more renewables but it is a problem."

Are chip makers committed to sustainability?

Puhakka says it is unlikely TSMC executives will be losing too much sleep over its failure to meet its sustainability targets, as the dire chip supply situation is a bigger concern for clients. "The issue for the last year is that the customers have been more concerned about getting the actual product than its environmental impact," he says. "If TSMC calls Volkswagen and says 'we need to run at 80% capacity to reduce our emissions, so your order will be delayed for another month', I don't think that would go down very well. I think the fact they're not meeting targets reflects that the ramp in demand has been so hard that environmental issues have become a secondary concern."

Chip makers also avoid scrutiny of their environmental impact thanks to a lack of visibility to the end-user, says Josh Matthews, associate director at HFS Research, who covers tech and issues of sustainability in his research. "The semiconductor ecosystem is extremely complicated, not just in terms of manufacturing but how it interlinks with computing and other technologies," he says. "Outside of the industry, no one really knows what TSMC is, so while it might get a little bit of bad press for missing sustainability targets, it clearly doesn't feel under pressure to meet these targets, and that pressure has to come from the end-user."

How to improve sustainability in chip making

Building a more sustainable future for semiconductor manufacturing will require pressure from end-users and regulators, Matthews argues. He says the COP26 climate change conference, taking place in Glasgow later this year, could be a critical moment for setting higher standards around sustainability. "Environmental reporting standards need to be tightened up, and hopefully COP26 will result in a more standardised approach that makes it easier to benchmark across different industries and countries," Matthews says.

Environmental reporting standards need to be tightened up, and hopefully COP26 will result in a more standardised approach.
Josh Matthews, HFS Research

This in turn would make it more practical for customers of TSMC and the other chip companies to ensure that their suppliers adhere to high standards, Matthews says. "The more visibility you have of the environmental impact of any product containing a TSMC-manufactured chip, the more the massive purchasing power of the big electronics companies will come into play," he explains. "TSMC might be able to get away with some negative publicity or local sanctions, but if the threat is a big customer choosing Samsung instead then it becomes an issue they have to deal with."

The chip makers themselves have acknowledged the growing importance of sustainability, and Intel CEO Pat Gelsinger said in May that prioritising environmental issues will help the company "create both long-term value and respond to the growing importance of environmental, social and governance issues to our investors, customers, employees and other stakeholders".

Puhakka says the pronouncements of Gelsinger and his peers show that manufacturers know a day of reckoning is approaching. "In the longer term the car makers and the electronics companies will be asked to manage their supply chains more closely in terms of its environmental impact so they can meet their own sustainability goals," he says. "The car makers cannot claim to be environmentally friendly if they don't know what is going on in their supply chains. That scrutiny is coming, it's just that at the moment TSMC and the others haven't had to pay the piper yet."

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