Editor’s note: This commentary was written by Martin Chen, director of the Economic Division at the Taipei Economic and Cultural Office in Atlanta. TECO Atlanta sponsored a Global Atlanta-organized forum in March on innovation, technology and the future of U.S. trade in Asia.
As the global consumption of consumer electronics, home office products and electric cars increases, the semiconductor industry in Taiwan has grown rapidly to meet the needs of the international community, despite a drought that media outlets have reported will reduce production in Taiwan.
It is true that the drought has impacted Taiwan, as a lack of typhoons hitting the island for the first time in 56 years has left reservoirs in Taiwan at dire levels. However, the belief that the excess concentration of chip production capacity in Taiwan poses risks to global supply chains is misplaced. The Taiwanese government and TSMC have been working diligently to assure that production levels remain responsive to the needs of the international community.
The global pandemic has created an imbalance in the supply and demand for semiconductors, as auto customers cut orders after the outbreak last year while the demand for electronics and home office products soared as a result of social distancing. Electric cars have also seen rising demand.
As a result, Taiwan’s Ministry of Economic Affairs has actively coordinated with chip firms to improve production efficiency, increase production capacity and negotiate with existing customers to reallocate product output, thereby meeting demands and alleviating the shortage.
Semiconductors in Taiwan are now being produced at full capacity. In January 2021 (prior to the onset of the drought), Taiwan’s semiconductor exports totaled $11.92 billion, for an increase of 46.3 percent versus the same month in 2020. In March, at the start of the drought, our semiconductor exports reached $12.15 billion, up 24.4% from the previous month. From January to March 2021, the cumulative value of our semiconductor exports amounted to$33.81 billion, for a rise of 28.2 percent. During this period, orders for electronic product exports amounted to $46.22 billion, for an increase of 46.4 percent. Such growth showcases Taiwan’s ability to aptly respond to the challenges posed by the drought.
In the face of Taiwan’s most severe drought in more than five decades, the government has been implementing proactive measures. In October of last year, the water authority launched drought-relief measures to strengthen water supplies by conserving more water, searching for additional sources, and using water more efficiently.
At present, the water capacity in northern reservoirs is relatively sufficient. Yet, since the semiconductor industry is concentrated in Hsinchu (the northern part of Taiwan), work has been accelerated to complete the main backup pipeline and dispatch water from the Shihmen Reservoir to Hsinchu. In addition, measures have been adopted to establish backup wells, emergency desalination units and other facilities so that backup water resources can reach 272,000 tons per day, which would meet more than 50 percent of the 540,000 tons normally used in Hsinchu each day.
Measures are also being adopted in the Taichung area (central Taiwan) to promote better water utilization at construction sites and enhance subterranean water development, including 88 newly drilled drought resistant water wells, as well as emergency desalination and large-scale water purification equipment. It is estimated that water capacity will increase an additional 243,000 tons per day by the end of May.
In the southern region, measures have been taken to efficiently dispatch and use regional water resources, strengthen water diversion and storage, re-pump existing groundwater, and drill new drought-resistant wells. This is expected to increase the daily water capacity by the end of May to 483,000 tons, and thus improve the stability of water supplies.
Additionally, The Hsinchu Science Park, Taichung Science Park, and Southern Taiwan Science Park are equipped with water distribution pipes. The pipelines can reduce water supply without cut-offs. Manufacturers are also being assisted through water storage facilities and water-truck supplements to meet demands for production. Therefore, there is no impact on industrial production.
Wei Zhejia, president of TSMC, has said that water supplies in Taiwan are indeed tight, mainly due to the lack of rain, but the company has been working with the government to ensure adequate supply.
In addition, TSMC has formulated an emergency response plan on water rationing, turning wastewater into a backup water source, thereby ensuring that productivity is not affected by the water shortage.
Moreover, the TSMC plans to invest $100 billion to build new production lines within the next three years in order to expand production capacity. This collaborative effort between the TSMC and the Taiwanese government will ensure that the semiconductor industry will remain stable.
To date, Taiwan’s semiconductor exports and orders are growing. Owing to proactive drought-relief measures taken by the government, the water shortage has not affected any industries, including chips. It also guarantees that Taiwan will continue to provide the necessary semiconductors sufficiently, while maintaining the stability of global supply chains.
Read more: Economic Minister: Taiwan to Expand Chip Capacity for U.S. Auto Sector
Watch Economic Minister Wang Mei-hua’s remarks on automotive chip production in the March 2021 forum organized by Global Atlanta and the TECO office: