Host: Reese Tisdale
Guest: Cullen Mitchell | Analyst | Bluefield Research
Category: 🔬 Research
Podcast’s Essential Bites:
[13:22] “Taiwan is a really interesting case […] of the intersection of climate […] and water and supply chains. So Taiwan has been facing its worst drought in over 50 years. […] Parts of the island saw rainfall over the last six months that was 49 to 79%, lower than the 20 year average. And so the governing body, the Water Resources Agency, has responded to that shortage with suspending water service for two days a week, starting April 6. This is expected that it will reduce water consumption in those affected municipalities by 15%. Then there are a lot of industrial parks that are connected to groundwater, which wouldn't be affected by that shut off. And they're requiring those also to reduce their water consumption by 50%. And that includes a lot of big players in the semiconductor industry, [like] TSMC […]. Taiwan is huge for the semiconductor industry. They're responsible for about 22% of the global chip supply, followed close […] by South Korea, which is also 21%. So disruption to Taiwan semiconductor manufacturing really […] would affect that whole industry and all these other industries that are really dependent on this technology.”
[15:14] “This problem […] has a couple a couple angles to it. So the water shortage element really comes from [that] there weren't any typhoons that made landfall in Taiwan in 2020, for the first time ever […] in over half a century. […] Those storms really fill up Taiwan's water reservoirs, [in] June through September […]. And so even though now we're seeing some rain pick up in Taiwan […] in recent weeks, it's not nearly enough to make up for that deficit, or to meet current demand. And then we're also seeing this increased need for semiconductors because of more demand for a lot of different goods like cars, computers, TVs. [Also] the COVID […] pandemic really disrupted manufacturing supply chains. [So] we have this water shortage, increased demand, and then also supply shortage.”
[17:10] “Total shipments of semiconductors are […] increasing. So that […] will increase just the total water footprint overall of the industry. But then also, the amount of water per unit is also trending up as well. […] As semiconductor wafers are becoming more complex and we're able to put more layers on top of each other, the water footprint will continue to increase. […] Overall, the industry uses about two to 9 million gallons of water per day. […] The Taiwan government has promised that they have enough water to provide these chip making facilities with enough water through May. […] So given the shut offs on water supply, we're seeing manufacturing companies like TSMC […] have started trucking in their own water to supplement the supplies on site. But that can be pretty costly. TSMC has spent $30 million already on trucking. […] Manufacturers are […] developing these plans of being able to store up to two days worth of water on site, which is effective for addressing kind of acute water shortages, but [in the] long term […] that's really sort of just a band aid. But I do think TSMC is […] on the right track with taking a more proactive approach to this water sustainability issue. [In] 2016 they started working to improve on site water purification and recycling efforts, which would reduce their dependence on municipal and ground water sources. […] Some of TSMC’s facilities are now recycling 90% of their industrial wastewater.”
[20:00] “Taiwan is a really interesting example, but it's by no means the only one or unique. […] United States Samsung has a manufacturing facility in Austin, Texas that was forced to cease operations back in February [because of] rolling electricity blackouts that were happening due to another type of climate event of snow and extreme cold. And then further south on the coasts in Texas, PVC suppliers are just now catching up from the shutdowns that they had to do earlier this year. And now, Texas is an interesting example too, because their hurricane season is just around the corner. So they're kind of bookended by extreme weather. So this really is […] becoming a new normal that industrial players need to not just respond to, but prepare for.”
[21:53] “I think living through this pandemic, COVID has kind of reminded us that a heavy reliance on a single location for a supply chain is really risky. And now we're learning that as well with climate change. And then TSMC, I think, is a good example of demonstrating the value of onsite water management in tackling […] this water […] supply chain problem [by] increasing water efficiency.”
[24:10] “I think when looking at this concept of corporate sustainability, and ESG targets going forward, a lot of that's been focused on more on emissions […], but I think water really needs to and is beginning to take on a greater […] importance in these conversations, especially in the US. […] We were talking about Taiwan, but the US has its own own issues in the West, particularly, going through extreme drought right now. And we have a lot of important manufacturing facilities that are cited in these regions. […] The electric vehicle market […] is in Nevada and Texas and Arizona [and] a lot of the food and beverage industry is located in California. So drought could really disrupt a lot of our key industrial verticals. And then I think climate change as a whole is a really disrupting force for water and supply chain. Industries and companies that maybe historically haven't had to think about water as a scarce resource […], they think that there's always going to be all the water they need, are increasingly seeing that they do need to think about that as a scarce resource.”
Rating: 💧💧💧💧
🎙️ Full Episode: Apple | Spotify
🕰️ 28 min | 🗓️ 04/06/2021
✅ Time saved: 26 min
Additional Links:
BBC Article: Why the world should pay attention to Taiwan's drought
