Is TSMC going to generate its own power? New regulations may significantly increase energy costs for wafer fabs in Taiwan
TSMC may face a significant increase in its power costs. Taiwan, China, is reviewing a new energy rule that would allow large commercial electricity users to build their own power generation and energy storage facilities. Previously, relevant legislation had required large commercial users to offset 10% of their electricity consumption through renewable energy, but now large power users are required to generate and store their own energy.
TSMC may face a significant increase in its power costs. Taiwan, China, is reviewing a new energy rule that would allow large commercial electricity users to build their own power generation and energy storage facilities. Previously, relevant legislation had required large commercial users to offset 10% of their electricity consumption through renewable energy, but now large power users are required to generate and store their own energy. It is reported that all commercial entities with an electricity load of more than 5 megawatts are included in the discussion, which means that more than 400 semiconductor, optoelectronics, steel and petrochemical factories and artificial intelligence data centers in Taiwan will be affected. Among them, TSMC may be one of the most affected companies. It consumes huge amounts of power but is highly dependent on stable and high-quality power supply, because even a millisecond-level voltage sag may cause the entire batch of wafers to be scrapped. TSMC’s electricity consumption is estimated to account for 9% of Taiwan’s total electricity consumption. In 2024, TSMC's electricity consumption in Taiwan will be as high as 25.55 billion kilowatt hours, equivalent to the electricity consumption of 16.67 million households for a whole year. According to S&P Global estimates, TSMC's electricity consumption may account for 23.7% of Taiwan's total electricity consumption by 2030. If TSMC has to build its own power supply system, the economic benefits of its wafer fabs in Taiwan may be greatly reduced. On the one hand, self-built infrastructure will cost a lot of money, and on the other hand, Taiwan itself relies on energy imports and has no own energy supply channels. This may accelerate TSMC's capacity expansion in other parts of the world. In last week's second quarter earnings conference call, TSMC CEO Wei Zhejia announced an additional investment of US$100 billion in the United States to build four new wafer fabs, including a 2-nanometer process logic chip foundry and an advanced packaging factory. Currently, TSMC’s total investment commitments in the United States reach US$265 billion, covering 12 planned factories. An assessment from TSMC also noted that continued capacity expansion in wafer manufacturing, high-bandwidth memory (HBM), and advanced packaging and testing is expected to drive Taiwan's semiconductor industry's electricity consumption to approximately 52 billion kilowatt-hours this year. In the next ten years, the power demand of the semiconductor industry will double, which places great demands on local energy infrastructure. It is worth mentioning that in addition to new factories in the United States, TSMC has also planned 13 new wafer fabs in Taiwan, which means that TSMC has not canceled investment in Taiwan due to power problems.