8 Things You Should Know About Water & Semiconductors
By China Water Risk 11 July, 2013
China Water Risk sets out 8 things you should know about water & the semiconductor industry
Semiconductors are essential for our way of life. Without them, our mobile phones, laptops, and cars couldn’t function. They have enabled some of the greatest advances of modern times from the Human Genome Project, to advances in telecommunications and mobile computer technology. The semiconductor industry is a major contributor to the global economy. In 2011 the industry had worldwide sales of US$299.5 billion, KPMG estimates that when the effect on the whole electronics value chain is taken into account, the industry enables the generation of the equivalent of 10% of global GDP. Yet despite these benefits, there is a price to pay. Below we highlight eight facts you may not know about the semiconductor industry and its impact and reliance on water.
1. A thirsty business – A large production facility (Fab) uses up to 4.8 million gallons per day
A semiconductor is a miniaturized electronic circuit containing a multitude of transistors. Water is fundamental to the manufacture of semiconductors. Over a series of steps, semiconductors are built in layers on silicon wafers into integrated circuits (also called microchips). After each one of several dozen layers of semiconductors are added to the silicon wafer, it must be rinsed, requiring massive amounts of water. A great deal of this water is Ultra Pure Water (UPW), water that is thousands of times purer than drinking water. Water so clean, that it is regarded as an industrial solvent. To make 1,000 gallons of UPW takes roughly 1,400 -1,600 gallons of municipal water1.
To create an integrated circuit on a 30cm wafer, can require approximately 2,200 gallons of water; including 1,500 gallons of UPW.2 So a large fabrication facility (Fab) that processes say, 40,000 wafers a month, can use up 4.8 million gallons of water per day, this equates to the annual water consumption of a city of 60,000 people1.Clearly, the manufacture of semiconductors is highly water intensive.
Strangely, despite these substantial levels of water consumption, when the Chinese Ministry of Industry and Information Technology (MIIT) and the Ministry of Water published a notice to further promote water conservation in industry, the semiconductor sector was not included as a priority industry. Industries like iron and steel, textiles, paper, oil refining, food fermentation, and chemicals were on the priority list.
2) Energy Intensive – Fabs can use enough electricity to power a small city. Can China continue to power this industry?
The environmental footprint of the semiconductor industry is even greater as it is also very energy intensive. Fabs can use up to 30-50 megawatts of peak electrical capacity, enough to power a small city.1
Enter the water and energy nexus. In China, 97% of power generation is reliant on water, and the government plans to add a further 1.2TW of water-reliant power by 2030: equivalent to adding the combined total capacity of Australia, UK and the US. This aggressive power capacity build-out will add further stress to water resources, and could leave the semiconductor industry exposed to a potential double whammy of power and water shortages. For more information on China’s water energy issues, please read China: No Water, No Power.
3. With a growth rate of 14.4%, China expansion leads the Industry
From 2001-2011 China’s semiconductor production achieved a 10-year compounded annual growth rate of 24%. By 2010 China controlled 8.6% of the global market share in semiconductors, worth RMB144 billion.3 In 2011 China’s semiconductor performance far exceeded the worldwide industry. It’s production revenue grew from $38.1bn in 2010 to $43.5bn in 2011 for a growth rate of 14.4%; compared to the worldwide semiconductor industry which only grew at a rate of 0.4%.
Source: China’s impact on the semiconductor industry: 2012 update, PWC
However, whilst it’s share of global production has risen to approaching 9%, it’s share of semiconductor consumption is much higher. Over the past eight years, China’s share of the worldwide semiconductor consumption market has also grown from less than 19% in 2003 to just over 47% in 2011. In fact, in 2011, both China’s semiconductor consumption market and semiconductor industrial growth rates were more than ten times greater than the global industry growth rate.4
This trend of China’s growth in the market is expected to continue; China’s 12th Five-Year Plan has a goal to more than double the size of the semiconductor industry by 2015.
4. Eleven of the top 14 semiconductor Fab’s located in Asia Pacific
Despite the water intensity of the manufacturing process, a large number of Fabs are located in arid or semi arid regions of the world. Currently 11 of the top 14 semiconductor Fabs in the world are located in the Asia Pacific region, accounting for over 75% of total industry sales.5This inevitably adds further stress to water resources already under pressure from rapid population and economic growth as well as climate change.
Nowhere is this more true than in China, where of the 160 semiconductor wafer fab facilities in operation at the end of 2011, 79 (64% of capacity) were located in the East China or Yangtze River Delta region (Shanghai, Jiangsu from the Dry 11, and Zhejiang from the At Risk 9). The Bohai Ring or North China region, which mainly consists of Beijing,Tianjin, Hebei, Shandong and Liaoning, all part of the Dry 11, accounted for a further 31 Fab’s or 19% of China’s capacity4. For those of you familiar with China Water Risk, these provinces will sound familiar. As can be seen from the maps below, these production hotspots are in areas suffering from water stress through to extreme scarcity, raising questions about future viability in these provinces.
Outside Beijing a large semiconductor trucks in water to the facility several weeks a year and a back-up reservoir is maintained in addition to the municipality’s own reserves. 5 For more on the water disparity between China’s provinces, please review Who’s Running Dry.
5. Industry spend of approx $1 billion on water and wastewater systems and services
Each semiconductor Fab can cost up to US$2.5 billion, a large proportion of this capital expenditure is on water related systems. A UPW system can cost between 1-1.5% of total capital costs around US$25-40 million. The semiconductor industry spends approximately $1 billion on water and wastewater systems and services every year2 Through reduction, reuse and recycling water at semiconductor plants, the industry could save over $100 million per year. 7Effective recycling systems offer a great return on investment: a recent study showed a return on capital investment of five to seven months8.
In addition to recycling, the industry is taking steps to significantly lower the use of UPW through process optimisation. One example is the replacement of wet stations by Automated Wet Benches (AWB) for many wet etching processing steps, resulting in water use reductions of approximately 40%9.
6. Dirty industry? – Over 10,000 recorded environmental violations in China
Despite the millions spent on trying to clean up its act, the semiconductor industry in China is suspected of being involved in a large number of environmental violations. The production of semiconductors also utilises a number of chemicals. Because of this, wastewater from Fabs has been found to contain a range of harmful contaminants including arsenic, antimony, hydrogen peroxide, and hydrofluoric acid.
A search of the Institute of Public and Environmental Affairs (IPE) water pollution database reveals over 10,000 environmental violations for key semiconductor companies, over the period 2004-2013. The IPE database draws on government data.
Historically, semiconductor companies in the US have been subject to litigation linked to groundwater. With the current levels of groundwater pollution in China and ongoing investigations by the MEP, how long will it be before semiconductor companies start finding themselves named and shamed on the MEP’s blacklist? For more on China’s groundwater pollution problems, see here and for more on the MEP’s blacklist of companies, see here.
7. Industry accused of poor disclosure of its risk profile to investors
The semiconductor industry has reportedly been doing a poor job of disclosing water risk to investors.5 The reliability of water supply during the manufacturing process is a major aspect of the industry’s risk profile. The manufacturing cycle for a microprocessor can be between 11-13 weeks, and any forced shutdown during that period will result in all material being lost, effectively wiping out that quarter’s output for the facility. This is particularly worrying considering the location of some of the industry’s major manufacturing sites in water scarce areas.
8. Not all bad news – some Fab’s report 27-80% reductions in water usage
It is not all bad news however, Toshiba reports a 29% decrease in water use per chip. IBM at its Burlington Vermont plant, through using water conservation technology and advanced analytics, cut water use by 27% and energy bills by US$3 million. At Intel’s plant in Chandler, Arizona, an average of 4 million gallons of water a day is recycled, and through a reverse osmosis treatment plant is able to return drinking quality water back to the municipal supply. In all, through these measures and other water conservation efforts, Intel estimates to have reduced its intake from Chandler’s public water supplies by 80%.8
Water demands for semiconductors are expected to grow as the more complex new generation chips are expected to require up to 1.5 times more water.2What is more with the inbuilt short obsolescence built into modern day electronics and rising prosperity in the developing world for more on this see here and here for more information on this) the semiconductor industry is contributing to the rising e-waste problem and it’s toxic impact on groundwater. It is therefore increasingly important that water risk be made a primary concern, and that the sector as a whole follow leading companies such as Intel (see here) and start investing in water conservation and wastewater treatment technologies, which as shown offer quick returns on capital investment.
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2Pure water, semiconductors and the recession. Global Water Intelligence, Vol 10, Issue 10 (October 2009)
6 Watching water: A guide to evaluating corporate risks in a thirsty world. JPMorgan Global Equity Research, 2008
7IEEE 2010 International Symposium: Performing a Water Footprint Assessment for a Semiconductor Industry
8 Texas Agricultural Experiment Station at Texas A&M University. 2002. Efficient Water Use for Texas: Policies, Tools, and Management Strategies.
9Tritapoe, M.G., Chiarello, R. 1998. Water Conservation Through the Use of Process Rinse Optimization in Semiconductor Manufacturing. Semiconductor Fabtech, 8th edition, July 1998, p 239-243.
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