TSMC and Micron facilities affected by water supply cuts in Taiwan

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Taiwan semiconductor industry set to grow in 2021.

Taiwan’s government announced it would reduce the water supply by 15 percent in a region that hosts factories operated by Micron Technology and TSMC. Taipei issued a “red alert” because it is grappling with its worst drought in six years. Local leaders state the new rationing measures affecting Taichung and Miaoli County would begin on April 6.

Since water is essential to microchip fabrication, the restrictions could worsen the global chip shortage.

As of this writing, Micron has not publicly commented on the crisis. TSMC said it would increase its use of water tanker trucks to sustain its operations during the drought.

Why the Taiwan Drought is a Big Problem for Chipmakers

For almost 20 years, chipmakers have used large amounts of water to facilitate a fabrication technology called immersion lithography. As Ars Technica explains, the liquid improves the resolution of 193nm ultraviolet light during the etching process. That feature is a crucial part of in-demand nodes ranging from the widely utilized 90nm process to the cutting-edge 5nm lines. Providers also use water to clean their silicon wafers and cool their machinery.

Micron maintains a backend DRAM production facility in Taichung that is staffed by over 1,000 employees. The company uses the plant to support its position as the world’s third-largest memory chipmaker.

TSMC operates a 12-inch manufacturing site in the region that makes around 100,000 wafer starts per month (WSPM). The corporation tasks the facility with running some of its most advanced nodes, including its 7nm processes. The contract foundry utilizes that technique to fabricate products for AMD, Qualcomm, Nvidia, and Apple.

Because the resource is crucial to modern semiconductor manufacturing, the Taiwanese drought poses a serious threat to local operators. Plus, since the industry is dealing with the global chip shortage, the island’s water crunch could exacerbate the component bottleneck.

Mitigation Measures and Near-Term Outlook

TSMC started taking steps to ensure its sites had a steady water supply before Taiwan issued its red alert.

The firm started sending tanker trucks full of water to affected factories in early March. Gizmochina stated it paid $30.4 million to contract 100 water tanker trucks to service its plants last week. It also began running drills to prepare its workers to react quickly in the face of a worst-case scenario.

Currently, neither TSMC nor Micron have announced any fab downtime connected to the drought.

Earlier this month, the Taiwanese government said the island has sufficient water supplies to support its chipmakers through May. Taipei recently initiated an aquaculture sector conservation effort that enabled the island to save over 700 million gallons of water. That program allowed the region to set up a cushion for businesses and citizenry.

Local leaders expect typhoon season to replenish Taiwan’s overtaxed reservoirs this spring.

Nevertheless, TSMC has recently taken steps to address what Harvard Business School identified as its biggest disruption risk. The corporation announced it would establish a $12 billion state-of-the-art factory in Arizona last year. Reports recently emerged that the firm will up its investment to $35 million to make the plant into a Gigafab capable of putting out 100,000 WSPM.

In the long-term, TSMC’s efforts to expand and diversify its production capacity will be hugely beneficial to its customers. However, in light of the worsening situation in Taiwan, its clients and buyers of Micron’s DRAM might encounter sourcing difficulties soon.

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