From TSMC to Samsung, Asia’s chipmakers struggle to go green

Insufficient access to renewable energy in their home markets has left Asia’s biggest chipmakers lagging behind their US and European rivals in the race to cut carbon emissions.

Making chips, especially cutting-edge ones, is extremely energy intensive. But Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, and Samsung Electronics, the world’s biggest memory-chip manufacturer, are struggling to shrink their domestic carbon footprints.

TSMC chair Mark Liu told the company’s annual general meeting that Taiwan’s slowness in developing renewable energy was holding the company back from its environmental goals.

“Our overseas sites in the US and China have already turned to fully using green energy,” Liu said. “However, we have not yet moved to use much green energy in Taiwan. The reality is Taiwan does not have enough green energy for us to use.”

Liu said the industry-wide push to adopt renewable energy had intensified recently, especially since the Russian invasion of Ukraine. “It’s a competition among all the economies, from the US, Japan to Europe, to develop green energy,” the chair said. The war, which began in February last year, threw energy markets into turmoil, as Russia was a major exporter of oil and natural gas.

Samsung, meanwhile, said South Korea was one of the most challenging countries in the world to source renewable energy due to limited procurement options for companies, citing a consensus view from members of RE100, a global renewable energy initiative for corporations.

Samsung’s smaller peer SK Hynix said renewable energy accounted for only 4 per cent of total usage in 2021, while the figure for Japan’s Kioxia was just 0.02 per cent for the 12 months to March 2022.

The limited sources of renewable energy could result in Asia-made chips that are less green than those produced in the US and Europe, something customers are increasingly concerned about.

Doris Hsu, chair and chief executive of GlobalWafers, the world’s third-largest maker of wafer materials, said there was growing demand from clients, especially European chipmakers, to buy wafers produced with green energy. GlobalWafers has manufacturing facilities in nine countries across Asia, the US and Europe.

“This will be a long-term trend and will affect a company’s competitiveness. Whether your energy is green enough could become a decisive factor on whether you could get orders in the future,” Hsu said. “Customers will compare price, quality and whether your energy source is green.”

But Hsu said sourcing enough renewable energy in Taiwan, Japan and South Korea was challenging. “These places are all quite populous and it is not easy to obtain enough land or roof space for renewable sources such as solar farms,” she said.

“In most Asian countries, access to wind and solar power is limited,” an executive in the South Korean chip industry said. “It is also not easy to procure renewable energy from other countries due to geographical and diplomatic limitations.”

Samsung, TSMC and SK Hynix have pledged to use 100 per cent renewable energy for global operations by 2050, while US chipmaker Intel and Europe’s Infineon and STMicroelectronics aim to reach the same target before 2030, according to Nikkei Asia’s analysis of company disclosures. Top Japanese chipmakers Kioxia and Sony have both committed to fully use renewable energy by 2040, also later than their western peers.

Shortage of renewable energy could affect Asian chipmakers’ road maps for reaching net zero emissions. Electricity use accounted for 62 per cent of TSMC’s carbon emissions, according to the company. Liu said the company was assessing ways to advance the timeline and move the goal for achieving 100 per cent green energy use to between 2030 and 2050.

The race to go green comes as leading economies push to bring vital semiconductor production onshore in a strategy that includes convincing top Asian chipmakers to expand chip plants beyond their home soil.

An energy mix low in renewables and a lack of mature, recognised renewable energy certificates in the region are two factors holding back Asia’s chip industry in its pursuit of greener operations, chipmakers and analysts said.

Coal, oil and natural gas generation accounted for more than 80 per cent of Taiwan’s energy needs in 2022, while renewable energy made up just over 8 per cent, according to Taiwan’s Bureau of Energy. Taiwan is, moreover, phasing out the use of nuclear power — a low-emission power source that made up a little over 8 per cent of the total energy mix last year — by 2025.

South Korea is in a similar situation. Renewables accounted for less than 9 per cent of output in 2022, Korea Electric Power data showed, while nuclear power and fossil fuels totalled almost 90 per cent.

The US generated 22 per cent of its electricity from renewable energy sources in 2022, according to the Energy Information Administration. Renewable energy accounted for 41 per cent of energy produced in the EU in 2021, official data showed. But taking into account the bloc’s total energy mix, including imports, renewables made up just slightly more than 17 per cent of the total.

This state of affairs could affect investment and even put at risk Asian suppliers’ orders from global clients such as Apple, Google and Microsoft. The three have committed to using 100 per cent renewable energy by 2025 and have pushed their supply chains to facilitate such a move.

TH Tung, chief strategic officer of chip substrate maker Kinsus Interconnect Technology, said Taiwan’s target of 20 per cent renewable energy by 2025 was way behind the rest of the world and a risk to the island’s position in the global tech supply chain. Kinsus is a supplier to Intel, AMD and Nvidia, while Tung also serves as chair of key iPhone assembler Pegatron, the parent company of Kinsus.

“[This] high carbon-emission power generation would cause Taiwan to be ‘disliked’ by international society,” said Tung, who also serves as deputy director at the Taiwan Climate Partnership, a supply chain carbon-reduction initiative launched by major Taiwanese tech suppliers including TSMC, Pegatron and Apple-supplier Delta Electronics.

Kyungrak Kwon, a renewables expert at Plan 1.5, a non-profit policy advocacy organisation, said the South Korean government was not prioritising the expansion of renewable energy, and in turn “Korean companies are not getting enough renewable energy supply, which could undermine their competitiveness”.

Christophe Fouquet, executive vice-president of European chip tool maker ASML, told Nikkei Asia that energy sourcing would be essential criteria for his company when it came to selecting where to invest. “Over time, [green energy] becomes a condition for us to be able to run our business. So before we choose a site, we have to make sure that there will be access to green energy.”

Unlike the EU and the US, which are large economic blocs, the Asia-Pacific region is more fragmented, which makes it harder to create a unified market for renewable energy certificates, said an executive at Infineon, the biggest European chipmaker. Infineon said it had already reached its target of 100 per cent green energy use, including by purchasing renewable energy certificates, in its European and US operations but had yet to reach that goal in its Asia-Pacific operations.

According to GlobalWafers’ Hsu, meeting demands such as those of Infineon may well be a matter of survival. “Taiwan not only needs enough electricity for future growth but actually needs enough energy that is green to remain competitive.”

A version of this article was first published by Nikkei Asia on June 30. ©2023 Nikkei Inc. All rights reserved.

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