Climate Risk Rising For Chipmakers, S&P Says

S&P Global Ratings said the climate risk is rising for chipmakers, whose water consumption is growing, both absolutely and on a per-unit basis, as processing technology advances.

Climate change is raising the rate of extreme weather, the frequency of drought, and the volatility of precipitation, limiting chipmakers' ability to manage production stability, S&P said in a statement.

The rating agency, which explored semiconductor firms' rising sensitivity to water stress using Taiwan Semiconductor Manufacturing Company (TSMC) as a case study, said water security will be an increasingly important factor to chipmakers’ credit profiles.

“Mishandling of water resources could disrupt a firm's operations, hurt financial performance, and hit customer relationships,” said S&P Credit Analyst Hins Li. “By extension, any potential disruption in production may impact their end-markets given the generally integrated semiconductor supply chain."

S&P said the semiconductor sector is on track to increase water consumption by a mid- to high-single-digit percent each year, driven by capacity expansion and the demands of advancing process technology. Globally, chipmakers already consume as much water as Hong Kong, a city of 7.5 million, it noted.

Li said there’s a direct line between water use and chip sophistication, as fabs use ultrapure water -- fresh water processed to extremely high purity -- to rinse wafers between each process.

“The more advanced the semiconductor, the more process steps, the more water consumed,” he added.

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