Taiwan’s energy crisis is becoming a major concern for the global tech industry due to its significant role in semiconductor manufacturing. Despite being home to just a fraction of the world’s population, Taiwan hosts a substantial portion of the global semiconductor manufacturing capacity, including 92% of the most advanced computer chip manufacturing capacity, according to data from the United States International Trade Commission.
A recent report highlights Taiwan’s vulnerability to disruptions in its semiconductor supply chain. Any disruptions, whether caused by pandemics, natural disasters like typhoons or earthquakes, power shortages, factory shutdowns, or international conflicts, could have significant impacts on the global semiconductor supply.
The ongoing energy crisis in Taiwan, marked by major power outages over the past seven years and recent smaller disruptions, has raised concerns in the tech sector. Chen Jong-Shun from Chung-Hua Institution for Economic Research warns that potential power shortages and declining power quality could pose operational risks for the semiconductor industry.
The energy challenges in Taiwan stem from its heavy reliance on energy imports, especially oil and gas, with almost 100% of its energy supplies coming from abroad. This dependency makes Taiwan’s energy grid highly vulnerable to disruptions in global energy supply chains. Additionally, strained relations between Beijing and Taipei pose a constant threat to these supply chains, further jeopardizing Taiwan’s energy security.
Furthermore, years of underpriced electricity bills have strained Taiwan Power Company (Taipower), leading to significant financial losses. Despite soaring energy prices globally, Taiwanese electricity bills have remained lower than they were two decades ago, exacerbating Taipower’s financial woes.
This situation raises concerns about potential energy rations in the future, which could have far-reaching consequences for semiconductor markets globally. A disruption in Taiwan’s energy supply would not only lead to a surge in chip prices but also reduce the availability of chips, impacting various industries heavily reliant on semiconductor technology.
The implications of such a market shock are substantial, particularly as demand for semiconductor chips continues to rise, driven by the rapid expansion of Artificial Intelligence. Modeling by the U.S. International Trade Commission indicates that the United States would face significant challenges in filling the supply gap caused by a disruption in Taiwanese superconductor manufacturing, leading to substantial price increases for end users, especially in the logic chip segment.