WATER POLITICS

Taiwan’s water supply, the lifeblood of its critical technology industry, faces growing pressures from industrial expansion and climate change, a new report warns.

Advanced semiconductor production in Taiwan consumes daily water volumes comparable to those of a medium-sized city, with demand expected to grow even more as processing facilities expand. Much of this demand is for high-quality water, straining resources and requiring sophisticated treatment solutions.

Taiwan needs to do more to address this over the long term, according to the report published Thursday by the Research Institute for Democracy, Society and Emerging Technology (DSET) and the Environmental Rights Foundation (ERF). “The rapid growth in electricity demand presents an additional systemic challenge,” the report adds.

The warning comes despite efforts by Taiwan’s government and big companies to meet growing power and water demand through energy transition projects, power grid upgrades, advanced water technologies and interconnection pipelines.

How Taiwan navigates these challenges will have direct consequences for the world’s tech supply chain. But with President Lai Ching-te’s government locked in a showdown with the opposition-controlled legislature — which has taken the ax to budgets and sought to block his agenda — political obstacles may stand in the way.

The report said pitfalls include: the vulnerability of Taiwan’s 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 governments’ efforts to increase sewerage connection rates; and social resistance to addressing electricity grid bottlenecks.

Taiwan faces a pivotal moment in a long-running move to phase out nuclear power, rooted in public concerns over safety — especially after Japan’s Fukushima disaster — and a desire to break from the legacy of the old military regime. The island’s last reactor is due to go offline in May. But the failure of renewable energy growth to match the semiconductor sector’s rapid rise adds to the pressure.

“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,” the report says. But “stable interregional power distribution and reliable ultra-high-voltage infrastructure are crucial to ensure uninterrupted power and a secure semiconductor supply chain.”

Climate change poses a significant threat. Increasing air and water temperatures threaten power generation efficiency, while sedimentation and extreme rainfall are reducing the effective capacity of critical water reservoirs, according to the report. “Furthermore, growing industrial demand in regions with insufficient resources is exacerbating exposure to climate risks.”

Lu Tsaiying, research fellow and director of the Climate Resilience and Sustainability program at DSET, observed that the difficulty of securing Taiwan’s semiconductor supremacy, especially in terms of advanced chips, lies not only in “changing geopolitical dynamics but also the growing threat of extreme weather events.”

Taiwan’s “high reliance on inter-regional resource allocation necessitates enhancing the resilience of power and water transmission nodes,” Lu said.

To rise to the challenges, the report recommends improving water reclamation development and investment, incentivizing energy storage investments, establishing standardized climate risk assessments and empowering local governments. It also suggests assisting hard-to-abate sectors — typically heavy industries that struggle to lower greenhouse gas emissions — in making high-value, low-carbon transformations.

Steps could include streamlining procedures for water reuse projects by integrating environmental assessment requirements, and introducing a dynamic water tariff mechanism that adjusts industrial water rates based on seasonal supply and demand. Economic incentives for businesses to invest in water reclamation technologies and plant construction could also help.

Taiwan’s water policy could play an important role in the government’s pursuit of “friend-shoring” as well.

Chang Chen-yen, policy analyst of the Climate Resilience and Sustainability program at DSET, noted that top chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) is extending its supply chain in the U.S., Germany and Japan.

“Such action would not only be mutually beneficial to those like-minded countries in terms of diplomatic relationships and economic gains but also means countries facing different climate challenges could transplant TSMC and its partners’ water- and energy-management experiences to support their semiconductor industry and other manufacturing in general,” Chang told Nikkei Asia.

According to his estimates, TSMC’s new 2-nanometer chip fab in Taichung will consume 98,000 tonnes of water per day, equivalent to 7% of the city’s total water consumption. The company, however, has established itself as a leader in water management by introducing reclaimed water into the chip fabrication process, avoiding competing with other sectors for the resource and ensuring it is less affected by rainfall variability, Chang said.

“TSMC is also increasingly focused on reducing energy consumption by increasing equipment efficiency and optimizing energy control programs for cooling systems,” he added.

Despite such efforts, the report urges Taiwan to 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.”

Lai’s administration is well-aware of the risks. When presiding over the first national climate change committee meeting last year, the president warned about the impact of extreme weather and natural disasters.

“Increasingly, what were once considered ‘once-in-a-century’ droughts and storms are occurring in rapid succession. Over the past eight years under the Democratic Progressive Party administration, the government had to establish two emergency response centers at least 19 times, either in close succession or simultaneously — one to address drought and the other to manage flooding,” he said.

“A sudden natural disaster is like an acute cold, while climate change is more like a chronic disease. But no matter which type of problem we’re facing, we all have a responsibility to continue strengthening Taiwan’s ability to adapt to the risks associated with extreme weather, and to continually make our nation more sustainable and more resilient.”