Chipmaker TSMC is expecting to pay more for its power in Taiwan than in any of the other countries in which it operates due to the increasing price of energy in the country.
As reported by the FT, the cost of electricity in Taiwan has doubled in the past few years, as subsidizing power in order to incentivize manufacturers has now become untenable for the government.
In addition to its Taiwanese fabs, TSMC also has manufacturing plants in the US and Japan, with an additional site currently in development in Germany.
Since Russia’s illegal invasion of Ukraine in 2022, the price of fossil fuels has significantly increased. This, combined with a lack of viable alternative power sources, has caused electricity prices to surge in the country, with the state-owned utility Taiwan Power Company reporting successive losses over recent quarters.
According to the FT report, the Taiwanese government has started to shift the financial burden onto the industry in order to stop inflation from spiraling.
In April the cost of electricity in Taiwan rose by 11 percent on average but industrial users such as TSMC faced a price hike of 25 percent. Furthermore, when the government froze electricity prices for households and so-called sunset industries, industrial users again faced a price increase of an additional 14 percent.
In addition to being a global hub for chip manufacturing, in recent years, companies such as Google, Keppel, Vantage, and Apple have all announced plans to build data centers in the country. As a result, the Taiwanese government has stopped approving data centers larger than 5MW in the regions north of Taoyuan, citing insufficient power supply.
While Taiwan still has lower electricity prices than the UK, Germany, Italy, France, Japan, and South Korea, industry experts expect prices in Taiwan to keep rising, eventually exceeding the industrial electricity costs of Japan and South Korea.
In October, a report from S&P Global estimated that TSMC’s electricity consumption currently accounts for eight percent of Taiwan’s overall usage, a figure which could rise to almost 24 percent by 2030 as TSMC continues to manufacture increasingly advanced semiconductors.
The report further found that between 2016 when TSMC started producing 10nm chips and 2023, when mass production of its 3nm chips began, the company’s electricity consumption more than doubled from ~110GW to around 250GW.
Although TSMC has a net zero by 2050 policy in place and has taken steps to try and reduce its emissions and move to 100 percent renewable energy by 2040, the company’s electricity consumption is by far its biggest greenhouse gas emitter.
For context, while the company is consuming around eight percent of Taiwan’s overall usage, the percentage of electricity currently being generated by renewable energy across Taiwan currently sits at around 9.5 percent.
The government hopes this percentage will rise to between 27-30 percent by the end of 2030.
Chipmaking equipment can be power-hungry, and newer machines require more energy. The latest generation NA EUV tools reportedly require up to 1.4MW per tool.
