Taiwan Semiconductor Manufacturing Corp. (TSMC), the world’s largest semiconductor maker, has pledged to use only renewable energy sources to power its plant in Kikuyo City, Kumamoto Prefecture.
For chipmakers, which need large amounts of electricity at all times, renewable energy sources are expensive. Yet TSMC is continuing its decarbonization efforts, not only as an expression of its social responsibility but also in response to demand from major customers.
In addition to TSMC, more and more companies in Kyushu are switching to renewable energy sources.
At the opening ceremony for TSMC’s first Kumamoto plant in February, then-Chairman Mark Liu emphasized the company’s commitment to using 100% green energy for the plant’s operations in the region.
TSMC also plans to use renewable energy sources for all of its other overseas factories, including those in Arizona, United States, and Dresden, Germany, which are currently under construction.
Chip factories run without a break, using huge amounts of electricity. The more advanced the technology, the more power it consumes. In Taiwan alone, TSMC used about 21 billion kilowatt-hours of electricity in 2022, which was a significant percentage of the total electricity used on the island.
TSMC does not disclose how much electricity the individual plants consume, but there is no doubt that the Kumamoto plant will consume significant amounts.
Companies generate green power themselves or buy it from utilities. While TSMC has not disclosed its purchasing method, sources say the Kumamoto plant will likely buy electricity certified as coming from renewable sources.
Customer pressure
The amount of energy that can be generated from renewable sources is limited, and green certificates — a guarantee that energy has been produced using renewable sources — also make electricity more expensive. Still, TSMC is under pressure from customers to switch to renewable sources.
One such customer is Apple — TSMC’s biggest buyer. The U.S. tech company is committed to decarbonizing the production of its products by 2030 and is requiring its global business partners to make similar efforts.
As of 2022, TSMC’s renewable energy adoption rate was 10.4%. Last September, it moved up its target year for achieving 100% renewable energy use — from 2050 to 2040 — in line with its pledge to meet Apple’s demand.
Other companies in Kyushu are also increasing their use of renewable energy. Rohm, a major manufacturer of electronic components, uses renewable energy for 100 percent of its electricity at its plant in Chikugo, Fukuoka Prefecture.
An official from the Kyushu Bureau of Economy, Trade and Industry said the use of renewable energy in the region is being requested not only by the semiconductor industry, but also by suppliers to aircraft manufacturers such as Boeing and Airbus.
“Western companies are strict when it comes to environmental and human rights issues,” the official said.
Industry sources say protecting the environment has become more than a matter of corporate social responsibility or community service — it has a significant business element. The global trend toward decarbonization is affecting the attitudes of investors and financial institutions, and companies seen as reluctant to pivot could face problems in their business dealings and financing, they said.
TSMC bills itself as the only chipmaker in the world to have been included in a global investment index of companies valued for their environmental sustainability for 23 consecutive years.
The chipmaker has unveiled plans to build a second factory in Kikuyo and is also considering a third plant in Japan. A former executive at a semiconductor manufacturing company in Kumamoto Prefecture believes that the availability of renewable energy supplies will be a key factor for TSMC in selecting a location for its third factory and beyond.
According to statistics on Japan’s electricity supply in the year ending March 2023, 21.7% of all electricity generated in the country came from renewable energy sources.
Electricity costs
Electricity costs pose a challenge to the growth of the global semiconductor industry. In addition, Japan faces headwinds in international competition, as electricity prices are much higher than in Taiwan, South Korea and the United States.
In May, the semiconductor subcommittee of the Japan Electronics and Information Technology Industries Association (JEITA) drafted a proposal to boost Japan’s competitiveness in chips.
In the proposal, the group listed estimates of electricity costs at chipmakers in major countries and regions of the world, including Japan, based on publicly available data from several companies.
Based on 2022 data for a plant producing 100,000 silicon wafers per month, annual electricity costs for advanced logic chips are estimated at around ¥42 billion in Japan. The figure is based on prices from Tokyo Electric Power Company Holdings, so electricity costs are estimated to be slightly lower in Kyushu, where nuclear power plants operate.
However, in South Korea and Taiwan, where the semiconductor industry is booming, annual electricity costs are estimated at around ¥23 billion, significantly lower than in Japan or Europe, where they are estimated at around ¥46 billion. In the U.S., the cost is even lower, at only around ¥20 billion.
A simple calculation shows a cost difference of almost ¥200 billion over 10 years between the countries and regions with lower tariffs and those with higher ones. The difference for other types of semiconductors also shows a similar result, although on a smaller scale.
TSMC expects to start operating the first factory in Kikuyo by the end of this year and to start construction of the second factory later this year. The combined production capacity of the two factories will total 100,000 wafers per month. The amount of electricity required by the two factories was not disclosed.
JEITA calls on the Japanese government to take measures to reduce electricity costs, restart nuclear power plants and promote the use of renewable energy sources.
Toyooki Mitsui of Kioxia, who is a member of JEITA’s semiconductor subcommittee, noted that electricity costs in Japan are among the highest in the world. Renewable energy use would spread if rates were lower than general electricity for industrial use, but it is currently difficult, both in terms of cost and supply, he said.
In addition to companies’ self-help actions, the industry association is convinced that government subsidies and tax breaks are also important in increasing Japan’s competitiveness.
“From the perspective of international competitiveness, we hope that attention will be paid to creating an environment where sufficient electricity can be purchased at a reasonable cost,” Mitsui said.
This section contains topics and issues from the Kyushu region covered by the Nishinippon Shimbun, the largest daily newspaper in Kyushu. The original articles were published on June 25.
