*Data from 2023 to 2025 is estimated.
Source: Capex data from Bloomberg, Barclays Research.
Water consumption data based on latest company disclosures, as at December 2023.

Chart title: More chips, more water
Subhead: Rising capex is expanding semiconductor manufacturing, driving up water demand

Overview: This bar and line chart shows how capital expenditure in the global semiconductor industry has risen steadily since 2015, more than doubling by 2022. It also illustrates how semiconductor companies’ water consumption has risen over this period.

Category one (bar): Global semiconductor industry capital expenditure (US billion dollars per year)
Category two (line): TSMC water consumption (billion litres per year)
Category three (line): SK Hynix water consumption (billion litres per year)
Category four (line): Intel water consumption (billion litres per year)

Overall, the chart shows that both the global semiconductor industry’s capital expenditure and water consumption have risen rapidly

Source: Capex data from Bloomberg, Barclays Research. Data from 2023 to 2025 is estimated. Water consumption based on company data.
Presentation: The bar and line chart illustrates the upward trend in semiconductor industry capital expenditure and water consumption.

Water consumption (billion litres)
Global semiconductor industry capex (US$bn)IntelSK HynixTSMC

Semiconductor chips are critical to the modern economy, from powering cloud computing to managing vehicle systems. Making them is a thirsty process, however. With global semiconductor manufacturing expanding rapidly, reducing the water intensity of processes is key to making the industry more sustainable and resilient.

Investment in new and expanded semiconductor fabrication plants (‘fabs’) is soaring to meet growing demand and as part of the reshoring trend affecting certain strategic industries. Having averaged US$93bn a year between 2017 and 2020, annual global investment in fabs is forecast to average US$147bn between 2021 and 2024.1

This boom translates into greater chipmaking capacity. In turn, this increases the industry’s demand for water: the global semiconductor industry uses an estimated 1.2mn megalitres of water every year.2 Large volumes of ultra-pure water are used to clean the silicon wafers placed in chips and to maintain a clean environment.

The need for reliable water supply, combined with potential cost savings, is driving investment in wastewater treatment and reuse by semiconductor makers. Local environmental considerations are an important factor too: many current and proposed fabs are in areas at risk of water scarcity, including Taiwan, South Korea and parts of the US.3

For example, TSMC, the world’s largest contract chipmaker, plans to construct a water recycling plant at a new Arizona fab to meet 65% of the facility’s needs.3 By 2030, the Taiwanese company aims to have increased its rate of water reuse by more than 30% across its operations, compared to 2010.4 South Korean peer SK Hynix meanwhile aims to reuse three times more water in 2030 compared to 2019.5

Innovative technologies can enable treated wastewater to be used as feedwater for the ultrapure water systems needed in the chipmaking process. Waste streams contain multiple contaminants that are difficult to remove. To overcome this, fabs are increasingly segregating wastewater streams for bespoke treatment methods rather than treating one combined stream in bulk. TSMC, for example, splits effluent streams into 38 categories (up from 10 categories in 2001) and requires 13 targeted wastewater treatment trains.

More rigorous treatment creates opportunities for comprehensive wastewater monitoring and digital analytics solutions that can target specific components, as well as sensors that can detect the presence of specific ions.

As global semiconductor production rises, specialist solutions that enable greater water recycling within fabs will be needed to meet the industry’s thirst for operational resilience and lower costs. By reducing the negative environmental impact of water consumption, particularly in water-stressed regions, these technologies also help align a critical fast-growing industry with the transition to a more sustainable economy.

1 Bloomberg, 2023. Barclays Research

2 Sustainalytics, 2017: Waste Not, Want Not – Water Use in the Semiconductor Industry

3 Semiconductor Digest, October 2022: Water Supply Challenges for the Semiconductor Industry

4 TSMC, 2023: Water Management

5 SK Hynix, 2023: Environmental

The specific securities identified and described are for informational purposes only and do not represent recommendations.

Nothing presented herein is intended to constitute investment advice and no investment decision should be made solely based on this information. Nothing presented should be construed as a recommendation to purchase or sell a particular type of security or follow any investment technique or strategy.  Information presented herein reflects Impax Asset Management’s views at a particular time. Such views are subject to change at any point and Impax Asset Management shall not be obligated to provide any notice. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary. While Impax Asset Management has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made.

Justin Winter

Senior Portfolio Manager

Justin is a co-Portfolio Manager of the Impax Water and Sustainable Infrastructure strategies. Justin analyses businesses globally with a particular focus on water, other environmental markets, and sustainable infrastructure, across the industrials, utilities, and materials sectors.

Before joining Impax in 2009, Justin worked as an investment analyst covering global equities for an Australian ethical investor, as a research analyst covering renewable energy at what is now BNEF (Bloomberg New Energy Finance). Before moving into finance, he was a consulting engineer working on major infrastructure projects including preparing Environment Impact Studies and conducting water supply analysis and flood modelling.

He holds a bachelor’s degree in Engineering from the University of Queensland and a master’s in commerce from the University of Sydney.

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