The world's largest chipmaker TSMC is about to be tested as it uses more and more power

• TSMC has high power usage, and Taiwan's tight electricity supply will test its chip production.
• Taiwan's sluggish electricity growth challenges the semiconductor industry's expansion.
• TSMC aims for net zero emissions by 2050, but renewable energy growth faces hurdles.

Taiwan's "sluggish growth" in its electricity supply will test the growth of TSMC, the world's largest chipmaker, and also the power-intensive semiconductor industry's growth, according to a new S&P Global report released last week.

For the past four years, TSMC's total energy usage has grown 10%-20% annually due to its production scale and technology usage, and it's expected to surge this year, the analysts said. Compared to other chipmakers, TSMC's electricity consumption far outpaces its peers, such as Micron and Intel, consuming more than 24 billion kilowatt-hours in 2023—almost equivalent to the entire city of Phoenix.

The surge in energy consumption last year is likely due to the increase in 3nm semiconductor production, the analysts said.

To develop cutting-edge chips at 7 nanometers or below, TSMC uses processes such as EUV or extreme ultraviolet lithography systems, which consume much more energy since making the chips smaller will require more energy-intensive manufacturing methods.

TSMC consumes more than 8% of Taiwan's total electricity, and the report said that demand could triple by 2030. Taiwan's unique challenges could also create further ripples due to its limited available land for solar panels and its dependence on imported fossil fuels. This makes both citizens and chipmakers vulnerable to power outages from natural disasters that strain the electricity grid.

In 2021, TSMC announced a commitment to reach net zero emissions by 2050 through a combination of renewable energy certificates and power purchase agreements. Last year, the company pushed forward its deadline for 100% renewable energy consumption to 2040 and upgraded to more efficient power transformers used for transferring electricity.

Adding renewable energy supplies would help alleviate this problem, although the island's geography makes it difficult to increase solar and wind power sources. Local power providers have faced procurement regulation changes, slowing down the growth of offshore wind power.

TSMC's risks will be controllable over the next three to four years since the company actively manages its power supply's stability, the analysts said. Still, the AI boom will not slow down electricity demand anytime soon.