The Heat Is Online

Taiwan Chip Industry Threatened by Drought

Taiwan Sacrifices Pigs, Seeds Clouds as Drought Hits Chipmakers, March 12, 2002

Hsinchu, Taiwan – (Bloomberg) – A city mayor and officials from Taiwan’s leading high-technology hub sacrificed pigs, chickens and ducks last month to rain gods. The next day’s drizzle wasn’t enough to fill reservoirs that supply water to the island’s $20 billion chip industry.

Faced with a drought that could force some of its biggest companies to cut production Taiwan will try another tack tomorrow. It plans to send aloft the air force to spray pellets into the clouds in hopes of producing a downpour.

Taiwan Semiconductor Manufacturing Co., the world’s largest maker of chips for companies such as Intel Corp. and Motorola Inc., said two weeks ago it might have to halt some production if rains don’t come soon. Other companies are equally concerned about the shortage of water they must use to wash away chemicals used to etch circuits on chips.

"We need lots of water to run a semiconductor plant," said Eric Tang, a spokesman at Powerchip Semiconductor Corp., Taiwan’s second biggest computer memory chip maker. "If there’s no water, then we shut down."

The water shortage is the latest headache for an industry just starting to recover after a year in which global chip prices fell below production costs and Taiwan entered its worst recession on record. If chip planets are idled, customers may suffer too.

"Many chip-design companies in Silicon Valley which depend on TSMC and UMC for production would be crippled," said Albert King, who counts shares in TSMC and its nearest rival, United Microelectronics Corp., among the $857 million he helps manage at HSBC Asset Management Taiwan Ltd.

* * *

Water supplies on the island are erratic; winters are generally dry while summers can bring rain-laden typhoons.

To counter the drought, the government shut off water to rice and other farmers in the Hsinchu area. Premier Yu Shyi-kun appealed on television for residents to conserve water.

"The world’s climate has become increasingly abnormal, so Taiwan often faces prolonged droughts and flash floods," said Yu, who was once a farmer. "The government is preparing to make rain with assistance from the air force."

"If it doesn’t rain," said UMC vice chairman John Hsuan, "we will ask the government to coordinate the water resources of the entire island."