Climate change poses significant challenges to Taiwan’s water and electricity systems. This report, prepared by the Research Institute for Democracy Society and Emerging Technology (DSET) and the Environmental Rights Foundation (ERF), examines the implications for Taiwan’s semiconductor industry, whose growing demands are intensifying resource pressures, especially considering often-overlooked climate stresses. Based on an in-depth study of resources-intensive advanced chip fabrication processes and Taiwan’s water and electricity challenges under climate change, this report outlines key policy recommendations to enhance the industry’s resilience to the climate crisis.
I. Beyond the Overall Resource Shortages Paradigm: Taiwan’s Semiconductor Industry Faces Regional Resource Imbalances and Unclear Climate Risk Assessments
Taiwan’s water and electricity supply have already faced systematic risks under climate change. Rising air and water temperatures threaten power generation efficiency, while sedimentation and extreme rainfall are diminishing the effective capacity of critical water reservoirs. Furthermore, growing industrial demand in regions with insufficient resources is exacerbating exposure to climate risks.
To mitigate these challenges, Taiwan should continue to invest in infrastructure climate resilience programs and demand-side management. Risk assessment guidelines require updating to address gaps related to electricity system operation and cross-regional coordination. Additionally, regular evaluations of cross-regional supply and allocation capacities should be carried out on a county and city scale.
II. High-Quality and Stable Water and Electricity Supplies are Essential for Fabricating Advanced Chips
At a regional level, advanced semiconductor processes consume daily water volumes comparable to those of a medium-sized city, with demand set to rise as advanced processing facilities expand. Much of this demand is for high-quality water, intensifying water resource pressures and requiring advanced water production technologies.
The rapid growth in electricity demand presents an additional systemic challenge. Based on our estimation, short-term demand growth for advanced processes—expected to begin mass production in 2025—remains manageable for the next 10 years. Stable interregional power distribution and reliable ultra-high-voltage infrastructure are crucial to ensure uninterrupted power and a secure semiconductor supply chain.
Droughts and heatwaves compound these risks, threatening both semiconductor processes and the supporting water and electricity infrastructure. However, these risks have not yet been systematically analysed. The government should include these risks in climate adaptation strategies and deepen collaboration with the industry to comprehensively upgrade regional water and power infrastructure. Simultaneously, the semiconductor industry should incorporate resource resilience into long-term planning and site selection.
III. Existing Response Strategies Fall Short Amid Growing Pressures from Industrial Expansion and Climate Change
Stakeholders across Taiwan are implementing innovative strategies to address resource challenges in the nation’s science parks. Key efforts include energy transition projects and power grid upgrades to meet rising electricity demands, alongside the development of advanced water technologies and interconnection pipelines to ensure a stable water supply. TSMC has established itself as a leader in water management by introducing reclaimed water into the chip fabrication process, thus avoiding competing with other sectors for water resources. TSMC is also increasingly focused on reducing energy consumption through initiatives such as increasing equipment efficiency and optimizing energy control programs for cooling systems.
Despite these measures, significant risks persist as the combined pressures of industrial expansion and climate change continue to strain resources. Challenges include the vulnerability of water supplies to prolonged droughts, the risk that the construction of reclaimed water plants may lag behind the expansion of semiconductor fabs, the dependence of reclaimed water availability on local government’s efforts to increase sewerage connection rates, social resistance to addressing electricity grid bottlenecks, and the inability of renewable energy growth to match the semiconductor sector’s rapid expansion.
IV. Recommendations for the Taiwanese Government and Insights for the Global Chip Industry in the Context of Manufacturing Reshoring
This report offers policy recommendations aiming to address both immediate and long-term challenges while ensuring the sustainability and competitiveness of Taiwan’s semiconductor industry in a rapidly evolving global landscape.
- Improve Reclaimed Water Development and Investment
- Streamline the procedures for reclaimed water projects by integrating environmental assessment requirements.
- Introduce a dynamic water tariff mechanism that adjusts industrial water rates based on seasonal supply and demand, providing economic incentives for businesses to invest in reclaimed water technologies and plant construction.
- Incentivizing Energy Storage Investments
- Provide corporate tax credits for forward-looking R&D expenditures, directing capital toward energy storage technologies essential for enhancing Taiwan’s power grid resilience.
- Encourage semiconductor companies to build on-site energy storage systems above a specified capacity to stabilize internal power consumption.
- Establishing Standardized Climate Risk Assessments
- Develop a cross-ministry information-sharing mechanism and a standardized process for climate risk assessments at the corporation level.
- Mandate businesses to disclose climate risks specific to their facilities in different regions.
- Enhancing Local Government Roles
- Local governments should take on more significant responsibilities in building climate-resilient infrastructure, including infrastructure development and financial cost-sharing.
- Facilitating High-Value Industrial Transformation
- Assist hard-to-abate sectors in transitioning to high-value, low-carbon industries.
