Zhitong App has learned from a report by S&amp;P Global that with the advancement of processing technology, semiconductor companies such as Taiwanese semiconductor manufacturers are facing the risk of water shortage, which may lead to an increase in chip prices.
Chip manufacturing is an industry that requires a large amount of water, as factories consume a significant amount of water daily for cooling machinery and ensuring that wafers are free of dust or debris. S&amp;P Global analyst Hins Li stated: &#34;There is a direct correlation between water usage and the complexity of chips, as semiconductor fabs use ultrapure water (freshwater treated to extremely high purity) to rinse wafers between each process step. The more advanced the chip, the more process steps, and the more water consumed.&#34;
In the report, S&amp;P Global pointed out that driven by capacity expansion and the demand for advanced process technology, the water consumption of the semiconductor industry is growing at a mid to high single-digit rate annually. The institution mentioned that the water usage of global chip manufacturers is already equivalent to that of Hong Kong, which has a population of 7.5 million.
S&amp;P Global stated: &#34;Water supply security will become an increasingly important factor affecting the credit status of semiconductor companies. Improper handling of water resources may disrupt business operations, damage financial performance, and potentially affect customer relationships.&#34; &#34;Meanwhile, climate change is increasing the frequency of extreme weather events, droughts, and precipitation variability, limiting the ability of chip manufacturers to manage production stability.&#34;
According to S&amp;P Global's data, after upgrading to the 16nm process node in 2015, TSMC's water usage per unit increased by over 35%. S&amp;P Global mentioned: &#34;We believe this is mainly due to the migration to advanced nodes, which require more manufacturing processes.&#34; &#34;Given TSMC's dominant position in advanced process chip manufacturing, potential operational disruptions related to water could disrupt the global tech supply chain.&#34;
However, S&amp;P Global pointed out that TSMC's dominant position allows it to &#34;lock in end demand and offset volume declines through price increases.&#34; The institution stated: &#34;If TSMC can maintain its technological leadership, then any production fluctuations will have a controllable impact on TSMC's business and profitability.&#34; Data shows that TSMC produces approximately 90% of advanced process chips used for artificial intelligence and quantum computing applications globally.
S&amp;P Global also mentioned that in situations of limited water supply, TSMC can focus on producing more advanced chips rather than mature process chips with typically lower profit margins, which could boost the company's earnings.

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Taiwanese semiconductor manufacturers and other semiconductor companies are facing the risk of water shortage, which may push up chip prices. This is because chip manufacturing requires a large amount of water, and with technological advancements and increasing demand, water usage is also increasing year by year. S&P Global pointed out that water supply security will become an important factor affecting the credit status of semiconductor companies, potentially disrupting business operations and damaging financial performance. After the 16nm process node, Taiwan Semiconductor's water usage per unit has increased by more than 35%, and potential operational disruptions related to water could impact the global tech supply chain. However, Taiwan Semiconductor's leading technological position allows it to offset declining sales by raising prices.

S&P Global: Chip manufacturers face risks of water shortage, chip prices may be pushed higher.