Fund managers warning to semiconductor investors
Investors in semiconductor stocks face a growing threat to industry valuations: a chronic shortage of water.
For Abrdn Plc, there are now few issues as pressing as water for the sector, according to David Smith, a senior investment director for Asian equities at the asset manager.
“Water management has been one of our top engagement areas with our semiconductor companies,” he said in an interview. “Water has the potential to be far more material in terms of operational costs, but also a threat to continuation as a going concern.”
Yet as a risk category, it “doesn’t get the attention it deserves,” Smith said. And it’s bigger than just a “niche” ESG concern, he said. “This is a material risk.”
Abrdn, which holds stakes in Taiwan Semiconductor Manufacturing Co. and ASML Holding NV, isn’t alone in its view. Morgan Stanley analysts warn of shortages and tensions ahead with technologies like artificial intelligence requiring vast amounts of water, while climate change and extreme heat are making access more precarious than ever.
Making semiconductors is among the most water-intensive undertakings out there, using about 1,869 cubic meters per dollar. Though it’s a lot less water than utilities use, it’s considerably more than is consumed for textiles and data centers, Morgan Stanley notes.
TSMC, whose home market of Taiwan is the world’s biggest producer of semiconductors, has set targets but fell short of its 2019 water consumption goal. It’s now working toward a 30% cut in unit water consumption by 2030 relative to 2010.
Achieving such goals is becoming increasingly challenging as the planet heats up. Bloomberg Intelligence estimates that Taiwan is facing “abnormal climate patterns” due to global heating and weather
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