Semiconductor manufacturing Sustainable growth improves the environmental balance of manufacturing

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The semiconductor industry is facing years of massive capacity expansion. Trends such as artificial intelligence and the Internet of Things continue to drive semiconductor demand. In addition, semiconductor technology could be key to tackling climate change by enabling the electrification of mobility. However, the manufacture of semiconductors is resource-intensive, which often draws criticism from local associations. Using publicly available data, the environmental impacts as well as the industry's efforts are analyzed.

Arndt Heinrich is a partner at Kearney and an expert in the field of semiconductors and high-tech.

Dr. Denis Hübner is a Principal at Kearney and an expert in the field of high-tech and industrial goods.

The semiconductor industry is on track to become a market with a volume of over one trillion US dollars by 2030, thus doubling in size. To close the recent supply gap and to be able to utilize the next key technologies such as artificial intelligence, autonomous driving, or IIoT, an expansion of semiconductor production is indispensable. In addition, semiconductors are key to digitization and electrification - they enable resource optimized operation and a switch from fossil to renewable energies - and are therefore crucial for global decarbonization. To create local manufacturing capacities, governments worldwide are investing heavily, with initiatives like the 53 billion USD US Chips and Science Act [1] and the 48 billion USD EU Chips Act [2]. However, semiconductor manufacturing is resource intensive, with substantial energy and water consumption, and generates significant amounts of waste.

Pressure to implement sustainable practices is increasing.

Environmental aspects are playing an increasingly important role in investment decisions, financing, supplier and end customer relationships. This increases the pressure on chip manufacturers to implement sustainable practices. Multinational corporations are committed to building sustainable supply chains and expect their chip suppliers to meet strict environmental standards. Accordingly, many semiconductor manufacturers have committed to net-zero emission targets. Reducing greenhouse gas emissions is a central issue for the industry that is actively being addressed. However, there are additional critical challenges that are less prominent in public perception: water consumption and waste generation. Particularly, the high consumption of pure water poses an increasing challenge as persistent droughts become more regular in core production regions. Apart from the ecological necessity, water scarcity could restrict the future growth of the industry.

Six regions dominate the industry's water consumption.

China, Taiwan, Korea, Japan, the United States and the European Union - six countries or regions have the largest share of semiconductor production capacity. Together, they account for over 90 percent of the industry's total annual water withdrawal, estimated at around 1.2 billion cubic meters. This corresponds to the annual water consumption of 22.5 million EU citizens [3]. For all the mentioned regions, at least medium water stress (ratio of water withdrawals to renewable water supplies) is expected by 2030, with many of them already threatened by droughts today. It is positive to see that companies like TSMC, Infineon, and Intel have already made significant progress in implementing water-saving measures. TSMC, for example, has reduced its water intensity by around three percent since 2010 while offering smaller node sizes [4]. Infineon has reduced its water intensity by around 24 percent since 2018 [5], and Intel was able to increase its water savings volume by around 36 percent since 2020 and achieved net-zero water intake through additional projects [6]. A simplified sample calculation of future water withdrawals, taking into account the recent savings successes, shows that if the positive trend can be maintained, the industry's water withdrawal can be reduced by 10 percent by 2030.

Semiconductor manufacturing generates 2.7 million tons of waste.

The twelve largest semiconductor manufacturers, responsible for the bulk of the industry's revenue, together generate about 2.7 million tons of waste annually (about as much as 5 million EU citizens [7]). Nearly 50 percent of the waste generated by the semiconductor industry is classified as hazardous. This considerable figure can be traced back to high-tech processes such as etching and cleaning, which have to use toxic acids. Over the past five years, the amount has increased with an average annual growth rate of 14 percent, while their revenues increased with a CAGR (Compound Annual Growth Rate) of about seven percent. To counteract the disproportionate growth in the amount of waste, the proportion of recycled waste also increased. Of the total waste generated by the 12 largest semiconductor manufacturers, about 240,000 tons are disposed of, while the remaining waste is recycled, reused or recovered. The trend of the past five years shows that although the total waste volume continues to increase, this increase is offset by more extensive recycling and reuse activities and the amount of landfilled waste has been held constant. Moreover, the industry has introduced various waste minimization strategies, including the substitution of hazardous resources, process optimization, and the introduction of recycling concepts. These measures are crucial for reducing environmental impacts. However, reducing the amount of waste generated and disposed of in the production of high-performance chips is becoming increasingly difficult. Optimizing old disposal processes is a major challenge, and it is unclear whether the trend of increasing the proportion of recycled waste can continue as in the past. To determine future waste loads, we examine how the proportion of waste disposed of develops in two scenarios. One scenario assumes that the proportion of recycled waste remains constant until 2030: Without further proactive measures, the amount of waste disposed of could almost double due to the expected production growth. By introducing best possible processes across all manufacturers considered, however, the amount of waste disposed of could be reduced by about 30 percent in the second scenario.

Investments in sustainable growth.

To save more resources in the future in semiconductor manufacturing, three important steps are necessary: the establishment of common transparency and reporting standards beyond CO2 emissions, the unlocking of optimization potential, and the expansion of partner ecosystems. Uniform standards across the entire industry promote accountability and facilitate the tracking of jointly set commitments. Collaborating with specialized partners for wastewater and waste treatment allows semiconductor companies access to expertise, innovative technologies, and infrastructure. This expansion of the partner ecosystem leads to scale effects and promotes sustainable practices throughout the industry. To secure water supply, semiconductor companies should proactively coordinate their consumption with local administrations. Because water is increasingly becoming a location factor, as its availability is essential for production. This makes water treatment a key factor in securing production capacity. The semiconductor industry has already made major contributions to a climate-neutral future and can further improve the local ecological footprint through targeted improvements.

References

[1] https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/

[2] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/european-chips-act_en

[3] https://www.ecologic.eu/2175

[4] https://esg.tsmc.com/download/file/2022_sustainabilityReport/english/e-all.pdf

[5] https://www.infineon.com/dgdl/Sustainability+at+Infineon+2022.pdf?fileId=8ac78c8b84a33cb40184bd6a9c8f0035

[6] https://csrreportbuilder.intel.com/pdfbuilder/pdfs/CSR-2022-23-Full-Report.pdf

[7] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Municipal_waste_statistics

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