Water Shortage Threatens Taiwan’s Tech Industry Development

Photo: Martti Chen

After a year with no typhoons, Taiwan is currently experiencing its worst drought in more than half a century. Reservoirs revealed their eerie secrets as the water level receded: bridges, schools, and even whole abandoned villages were uncovered. As of April, the worst-hit areas of Taichung and Miaoli Counties have been put on “Red Alert,” with rolling two-day water shutdowns being carried out every week, as well as additional restrictions for businesses. If the long-anticipated monsoon “plum rains” in May and June do not come, the entire west side of the island, including the silicon stronghold of Hsinchu, is in danger of going into Red Alert.

Water trucks have been rolling into the Hsinchu Science Park for months now to supply the tech manufacturers there after they were asked to reduce their use of the municipal water supply by 13%. Chipmakers, including Taiwan’s world-leading Taiwan Semiconductor Manufacturing Co. (TSMC), are big users, according to semiconductor analyst Mario Morales.

California-based Morales, Program Vice President of Semiconductors and Enabling Technologies at International Data Corp. (IDC), says that despite efforts by TSMC to reduce and reuse water, chipmaking is fundamentally a thirsty business.

“You use the water for purification in order to reduce contamination,” said Morales. “So for very pure wafers, you need thousands of metric tons of water a day.”

Fortunately, contingency planning by the Ministry of Economic Affairs (MOEA) Water Resource Agency paid off. A water pipeline that came online in the nick of time in January this year brings more than 20,000 metric tons of water from relatively wet Taoyuan to parched Hsinchu every day. Without the pipeline, an emergency desalination plant, and the eight emergency wells tapping into groundwater in the area, the two Baoshan reservoirs in Hsinchu County that supply the science park would already be dry.

Even as the countdown is in progress for how many days the water supply in the reservoirs will last, Morales says he is confident that TSMC and other chipmakers – whose wafers are the foundation for the world’s high-end electronics – will not allow production to be impacted by lack of water.

“That would simply not be an option given the value of their production,” says Morales. “No matter what it takes, they will find that water. Even if they have to import it from Korea or Malaysia, they will make it happen.”

What will be more interesting to watch is how water shortage issues and other concerns over resources shape future investment in Taiwan.

Water-intensive sectors like semiconductor manufacturers in Hsinchu have had to begin using water trucks after they were forced to cut back use of the municipal water supply by 13%. Photo: Martti Chen

“The climate is changing and we’re going to see droughts like this more and more often in Taiwan,” says Morales. “For companies like TSMC, that will be a consideration as they diversify their footprint in capacity.”

The world’s two big chipmaking titans, TSMC and South Korea’s Samsung, both have major investment plans in Arizona. They are eyeing generous tax incentives, a highly educated local talent pool fed by local universities, and, surprisingly, assured water resources.

“Arizona might be largely desert, but they have the infrastructure for the water to come from Texas, New Mexico, Colorado, and California,” says Morales. “They also have mountains that collect a good bit of snow in the winter.”

Interestingly, despite this season’s extreme drought and the specter of more dry years to come, the average annual rainfall in Taiwan has not decreased. What Taiwan is experiencing is a phenomenon called “interannual variability,” says climate expert Chia Hsin-hsing, general director of Taiwan Sustainable Environmental Engineering Consulting Co.

“We are going to get more and more years like this that are bone dry, interspersed with years where we’re going to have problems getting walloped by typhoon after typhoon,” says Chia. “We expect this unpredictability to get worse with climate change.”

As for this year’s weather prospects, Chia says the nation should brace for a drier than usual monsoon season. “We are still affected by the tail end of this year’s La Niña effect,” she says. “Chances are we’ll get less rain than the average monsoon season.”

As for the next typhoon season, which should start from July, Chia says it’s simply too soon to tell.

Even for dry years, Taiwan is still “relatively blessed” with water resources, she says, arguing that the government should have done more, earlier, to upgrade Taiwan’s water infrastructure.

“Most of our reservoirs are old and really clogged with silt. This prevents them from holding as much water as they should,” says Chia. “We should also make pipeline repair a priority so that we are not leaking water.”

Despite the spotlight on industrial water use, the majority of Taiwan’s water actually goes toward another use: agriculture. Rice paddy culture floods the fields so that the plants that produce the rice that the nation is accustomed to eating can grow with their roots sitting in water.

“We are still using irrigation ditches from the Japanese era,” says Chia. “The Council of Agriculture is also having difficulties convincing farmers to grow more drought-resistant crops.”

In fact, 70% of Taiwan’s water is used for agriculture, while roughly 20% is for daily civilian use and only 10% for industrial purposes. It’s a ratio that could warrant adjustment to alleviate resource uncertainty that might deter companies from investing in Taiwan, says Morales.

“They grow excellent rice in Thailand,” he notes, indicating that Taiwan could import more rice from abroad and divert water normally used for rice cultivation to more valuable production processes.

Another problem that needs to be fixed is Taiwan’s underpricing of water, says Chia. At NT$10 per cubic meter, it is just about the cheapest in the region. Water prices in Singapore and Japan are at least five times that amount.

The idea of raising utility prices is a hot potato in Taiwan. While even government officials agree that prices are low, there seems to be no urgency to address the matter politically. The Water Act was amended in 2016 to empower the Water Resource Agency to put a surcharge on large users using more than 1,000 cubic meters a day, but five years and more than 60 conferences later, there’s still no timeline for implementation.

“Eventually, we need to tackle this problem,” says Chia, “Taiwan shouldn’t be a country with drought problems if we properly manage our water resources and treat every drop as precious.