According to the latest report from S&P Global Ratings, a credit rating agency, semiconductor manufacturers such as TSMC are facing the risk of water shortage as process technology continues to improve.
Foundry leader TSMC has a leading edge in technology and can respond to the crisis by raising prices or adjusting production lines, and the impact should be limited.
Chip manufacturing is a water-intensive industry, and large amounts of water are required in the factory every day to cool the machines and ensure that the wafers are free of dust or debris. S&P Global Ratings analyst Hins Li said that there is a direct correlation between water consumption and chip precision, as fabs use ultrapure water (treated water of very high purity) to clean wafers between each procedure, according to CNBC. The more advanced the semiconductor manufacturing process, the more processes and the more water consumed. 
According to the S&P report, TSMC has also seen an increase in water consumption of more than 35% since entering the 16nm process node in 2015, which we believe is attributable to the need for more processes when switching to advanced nodes. Judging from TSMC's dominant position in advanced chip manufacturing, once the operation is interrupted due to water, it may further disrupt the global technology chain. However, S&P stressedTSMC's leading edge allows it to grasp high-end demand and gain high customer dependence, and if it faces such risks, it can offset the impact of declining unit sales through price increases。The report notes that the impact of any output turbulence on TSMC's business and profitability should be manageable as long as it can maintain its technological leadership. TSMC manufactures 90 of the world's most advanced chips, which are used in artificial intelligence (AI) and quantum computing applications. S&P arguesIn the event of limited water, TSMC will prioritize the production of more advanced chips and reduce the less profitable mature process chips, which will also help to make profits。According to the report, water consumption in the semiconductor industry is expected to grow at an annual rate of 5.9 driven by production expansion and demand for advanced process technologies.
The annual water consumption of the world's largest chip manufacturers is almost the same as that of Hong Kong, which has a population of 7.5 million, and the importance of water safety will increase day by day for the credit assessment of semiconductor manufacturers. Improper water management can disrupt a company's operational and financial performance, and even affect customer relationships.