The FDI angle:  

• Water usage in the semiconductor sector has been put under the spotlight as climate change has increased the frequency of hotter spells of weather.
• In the arid desert US state of Arizona, questions have been raised about water usage at facilities being constructed by TSMC and Intel.
• Technology enables chipmakers to recycle, reuse and conserve upwards of 90% of their water, but more severe droughts have made the management of local water resources even more important.

In June 2023, the US state of Arizona restricted future home-building in parts of the Phoenix metro area due to a lack of groundwater. One month later, the city recorded its hottest ever month, with temperatures above 110 Fahrenheit (43.3 Celsius) every day. 

Arizona epitomises the need to balance economic development with management of strained water resources, as climate change leads to droughts and more frequent, hotter spells of weather. Along with population growth above 18% since 2010 in Phoenix, water-intensive semiconductor plants are currently being built by Intel and TSMC, which is set to invest $40bn to build two large chip fabrication facilities (fabs).

Despite agriculture using the vast majority (72%) of Arizona’s water, according to 2019 figures from the Arizona Department of Water Resources (ADWR), some have questioned whether the expansion of the state’s already burgeoning semiconductor industry is the best use of water in a state reliant on the dwindling Colorado River for 36% of its supply. 

“We’re going to have to grapple with probably less water for the state of Arizona and other US states that rely on the Colorado River,” says Tom Buschatzke, the director of ADWR, who notes there has been a prolonged drought in the western US. The remainder of Arizona’s water supply is made up by groundwater (41%), in-state rivers (18%) and reclaimed water (5%).

While the building of these chip plants is not going to create a shortage for other water users, industries will have to compete with human consumption and other use cases for the state’s water allowance defined by law. 

Technology has enabled chip manufacturers to greatly improve the rate at which they can reuse water in their facilities and restore local water resources. But as extreme weather becomes more frequent in chip production hubs like the western US, Taiwan and northern China, balancing the interests of different water users, from residents to businesses and agriculture, has become more important than ever.

Thirsty fabs

Water has been a critical part of semiconductor manufacturing since the 1980s, being used to cool equipment and clean silicon wafers. But the sector’s thirst for water has grown with the development of larger chip wafer fabs and more advanced, smaller chips. 

An “average” chip fab today uses about 10 million gallons of “ultra pure” water per day, to prevent impurities damaging the nano-scale machinery. Fortunately, the technology behind recycling this water has vastly improved, according to Anurag Bajpayee, the CEO of Gradiant, a global water treatment specialist that works across industries, and whose clients include TSMC and Micron.

“Back in the day, [semiconductor manufacturers] used to only be able to recycle 60–70% of water at best,” he says. “Today they can recycle up to 99%.”

While the industrial sector uses only 6% of water in Arizona, this is likely to grow as Intel expands its campus in Chandler and TSMC builds its new fab in northern Phoenix. TSMC will use 8.9 million gallons of water per day to operate a single fabs, which is nearly 3% of the city’s current water production, according to figures cited by the American Bar Association. The Taiwanese chip maker has tried to assuage fears about its water usage in Phoenix by building an industrial water reclamation facility.

“TSMC’s goal is to increase the supply of reclaimed water to gradually reduce city water consumption each year,” says a TSMC spokesperson. They added that the company is also “exploring the concept of being water positive” in the hope of restoring water resources in the future. 

Judicious use

Chris Camacho, the CEO of the Greater Phoenix Economic Council, says that Arizona is “very judicious about its water use” and stresses that Intel and TSMC are “great environmental stewards”, recycling as much as 90% of the water they use in their facilities.

The Arizona Water Management Act of 1980 means that any new development in an “active water management” area — which covers about 80% of the state’s population — has to have an assured water supply of at least 100 years. An ADWR report published in June found that groundwater supplies were 4% short of the level needed, leading to the halting of new residential development in certain parts of Phoenix outside the regulated water areas. Over-pumping of groundwater aquifers has also led to subsistence, where land-surface levels have been lowered.

Mr Camacho stresses that there are still about 80,000 housing permits moving ahead in the Phoenix area. “We’re not going to get to a position where we don't have the water to meet resident demands or future user demands.” He says that the city of Phoenix has also invested more than $200m in a new water campus to supply the 10,000-acre area where TSMC is building its fabs.

Chandler collaboration

US chipmaker Intel claims to already be at net-positive water — meaning the combined total of its returned wastewater and water restored to local watersheds is more than it uses — in both the US and India. It aims to achieve this across its global operations by 2030, including in its facilities under construction in Israel, Ireland and the US state of Ohio.

At its Ocotillo campus in Chandler, south-east of Phoenix, Intel is investing $20bn to build two new fabs. Todd Brady, Intel’s chief sustainability officer, tells fDi that the company is “committed to responsibly managing” its global water use. “We are confident in our plans to expand in Arizona,” he said, adding that the company has operated in Chandler for more than 40 years. 

Through a longstanding public–private partnership with the city of Chandler, Intel has operated an Ocotillo brine reduction facility, which has a daily capacity to treat 2.8 million gallons of water from its manufacturing process.

“This industrial water is reused by Intel — reducing the need for additional freshwater withdrawals from the city — and also returned to the community,” says Mr Brady.

Intel has also funded 21 non-profit-led water restoration projects in Arizona. It claims to have restored 1.3 billion gallons of water to the Colorado River watershed last year. Over the past decade, Intel claims to have saved 52 billion gallons of water, enough to sustain about 470,000 average US households for a year.

Prioritise projects

Amid the growth of dynamic water-intensive industries like semiconductors, as well as electric vehicles, batteries and data centres, Mr Camacho says that cities should decide which strategic industries they plan to develop.

You’ve got to do a lot of different things that individually look small, but collectively, add up to sound water management

Tom Buschatzke

“It’s really about prioritising those industries and projects that we feel are going to have the most net economic gain for our community,” he says, adding that these projects are given expedited permitting and more water apportionment.

As climate change makes dwindling water reserves a more critical issue globally, there is a need to use a mix of approaches to effectively manage the problem. “There are no silver bullet solutions,” says Mr Buschatzke of ADWR. “You’ve got to do a lot of different things that individually look small, but collectively, add up to sound water management.”

This article first appeared in the August/September issue of fDi Intelligence