Manufacturing chips requires a lot of energy and electricity, and Taiwan, as a key link in the global semiconductor industry chain, has a critical impact on the stability of its energy supply for the entire industry. In the past seven years, there have been three major power outages in Taiwan, and there was also a small power outage last year.
According to a report by The Paper, Taiwan's energy dependence on foreign countries is extremely high, reaching 97.7%, and once imports are blocked, it will directly affect energy security. In addition, Taiwan's natural gas power generation accounts for 37.2%, which is extremely dependent on LNG shipping. Any disruption to shipping could lead to a shortage of natural gas supply, which in turn would affect the supply of electricity.
Taiwan's semiconductor industry has a very large demand for electricity, with the industrial sector accounting for about 55.3% of Taiwan's electricity consumption, and continuous and reliable power supply is the key to the normal operation of the semiconductor industry. If Taiwan is forced to implement frequent power rationing due to insufficient power supply in the future, this will directly affect the continuity of production in the semiconductor industry, which may lead to a reduction in chip production, which will not only cause huge losses to Taiwan's semiconductor industry, but also affect the global semiconductor industry. Power shortages can cause chip manufacturers to be unable to deliver orders on time, affecting the stability of the entire supply chain.
TSMC is the world's largest manufacturer of advanced chips, accounting for about 60% of global foundry revenue. The company plays an important role in the booming generative AI boom, and TSMC is also favored by tech giants such as Apple and Nvidia.
Figure: Taiwan's energy crisis may affect the global semiconductor industry
Secondly, the rapid development of artificial intelligence in recent years, and the demand for power in data centers have also led to the rapid expansion of power demand, which makes Taiwan's future power supply face considerable uncertainty. Industry insiders said that Taiwan's power crisis is partly due to the aging of power supply equipment and power grids, but more importantly, electricity bills are too low, resulting in increased demand and supply shortages. According to Taiwan's Ministry of Economic Affairs, although prices are soaring around the world, Taiwan's electricity bills are now cheaper than they were 20 years ago. As a result, Taiwanese power companies have also been losing money.
Due to the power shortage, the Taiwanese government may raise electricity prices for large industrial users, including chip manufacturing companies, to alleviate the contradiction between power supply and demand. This will increase the production cost of enterprises and negatively affect the profitability of the chip industry. At the same time, power shortages can also lead companies to take other measures to ensure production stability, such as purchasing backup power or improving production efficiency, which can also increase operating costs.
As the current situation is concerned, Taiwan's power crisis is a long-term issue, and by diversifying energy supply, improving energy efficiency and establishing emergency response mechanisms, the global semiconductor industry can better cope with such challenges and ensure the stability of the supply chain and the sustainable development of the industry.
