The rapid development of the semiconductor industry and AI data centers could put enormous pressure on global water resources. The production of advanced chips and cooling systems requires large amounts of ultrapure water. While factories consume millions of gallons of water per day, equivalent to a city of 60,000 people, the tech industry is improving water recycling and reuse processes.

With the rise of AI, water stress has become more significant. AI data centers can use up to 19 million gallons of water per day, equivalent to the needs of a city of 50,000 people. Climate change exacerbates the problem, with nearly half of new facilities expected to be located in areas with extremely high water risks by 2030. These factors threaten not only the local environment but also the global semiconductor supply chain.

Semiconductor manufacturing requires a complex six-step process that consumes large amounts of ultrapure water. For every 1,000 gallons of ultrapure water produced, 1,400 to 1,600 gallons of municipal water are required. A large semiconductor factory that produces 40,000 wafers per month consumes 4.8 million gallons of water per day, equivalent to the water used by 60,000 residents for a year. TSMC, the world's largest chipmaker, is building a new plant in Phoenix, Arizona, and has pledged to reuse 65% of the water it uses. It's a reflection of the growing emphasis on water conservation, and the scale of the problem: Semiconductor factories use as much water as Hong Kong, a country of 7.5 million people.

Water Challenges Facing Semiconductor Manufacturing

The technology we rely on - from phones and computers to LED lightbulbs and cars - can't function without semiconductors. And semiconductors can't survive without water - lots of it.

Water is critical at all stages of semiconductor manufacturing. This heavy reliance on, and impact on, water is becoming a key vulnerability in the fast-growing global chip industry. That, in turn, exposes tech companies that need semiconductors to build electronic devices and increasingly advance their artificial intelligence (AI) technologies to significant financial risk.

The tech industry's growing demand for chips is putting even more pressure on already overburdened water systems.

Semiconductor factories rely on water to cool their systems and generate electricity - globally, they already use as much water as Hong Kong, a country of 7.5 million people, according to S&P Global.

But what really drives the industry's demand for water is its need for ultrapure water, used to rinse residue off silicon chips during the manufacturing process.

Ultrapure water is thousands of times cleaner than drinking water and is treated through processes like deionization and reverse osmosis to remove contaminants, minerals, and other impurities that can damage chips. It takes approximately 1,400 to 1,600 gallons of municipal water to produce 1,000 gallons of ultrapure water.

Water usage in chip manufacturing plants

Today, an average chip manufacturing plant can use 10 million gallons of ultrapure water per day - the equivalent of 33,000 U.S. households' daily water use.

As the world's largest contract chip maker, TSMC's operations could be disrupted by water issues, affecting the entire global semiconductor supply chain and raising prices for buyers.

In addition to using a lot of water, chip manufacturing produces wastewater containing pollutants, including heavy metals, that are toxic to aquatic ecosystems and humans.

Some manufacturers have pledged to offset the impact of increased water use. For example, a new chip plant TSMC is building in Phoenix, Arizona, says it will recycle about 65% of the water it uses, reducing its reliance on the city's water supply. The area is struggling with population growth and growing water shortages due to historically scarce water from the Colorado River, which feeds it.

Meanwhile, Intel, which is building two new chip plants in the Phoenix suburb of Chandler, partnered with the city to build a reclaimed water facility. The reclaimed water will replenish groundwater supplies and provide more water for Intel's cooling systems.

But the problem isn't going away anytime soon. Demand for semiconductors is growing, but chip manufacturing hotspots, including the western United States and China, are experiencing persistent droughts and extreme weather. In a 2023 survey of 100 senior decision makers at semiconductor companies, 73% cited natural resources, including water, as one of the environmental factors that pose the greatest risk to their business.

Companies can also face regulatory risks. For example, water systems around semiconductor manufacturing plants in places like South Korea have been severely polluted, leading to environmental violations.

Water risk in the semiconductor supply chain is one of many issues that has prompted investors to engage with large technology companies on water sustainability through initiatives such as the Water Assessment Financing Program. Investors participating in the program encourage and support companies that the program focuses on to work to address the extensive impacts they have on the water resources that their value chains rely on.

There is a need to fully recognize water risk factors in the supply chain, especially in chip manufacturing and metal mining, as shown by the results of a recent benchmark report that evaluated the water management practices of 72 companies on the initiative's list.

Sony, one of the technology companies surveyed, discussed the impact of semiconductor production on water resources in a public disclosure and said it is working to reduce its reliance on fresh water at its semiconductor manufacturing facilities.

SONY semiconductor manufacturing co., ltd.

Sony, one of the tech companies surveyed, discussed the impact of semiconductor production on water resources in public disclosures and said it is working to reduce its semiconductor manufacturing facilities' reliance on fresh water.

For example, the Nagasaki Technology Center, a production center owned by Sony Semiconductor Manufacturing, reuses about 80% of its manufacturing wastewater. The company also plans to build a wastewater recycling facility outside the plant.

According to the company, water recycling and emission reduction activities have helped keep wastewater emissions from chip production at almost the same level despite increased production. However, more transparency is needed to understand whether the company is reducing water risks in its own manufacturing and purchased semiconductors.

In addition to reusing and recycling water, semiconductor manufacturers can also improve water efficiency by upgrading water monitoring systems to identify lost water resources and adopting new technologies that consume less water. It is important that companies consider water risks in business planning, such as facility site selection decisions.

Tech companies that purchase chips can promote these strategies through procurement policies that ensure they purchase chips from manufacturers that adopt best water management practices. Large tech companies that manufacture their own chips should disclose relevant water risks and the plans or practices they have in place to mitigate them.

Further down the supply chain, mining the precious metals and rare earth elements needed to produce semiconductors also consumes and pollutes water. Four of the five companies assessed in the benchmark have disclosed efforts to responsibly source minerals or work to improve mineral traceability, but did not discuss the specific water impacts of their mining activities.

Source: Content compiled from IOplus

Reference link: https://ioplus.nl/en/posts/major-concerns-water-use-big-tech-and-semiconductors

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