Taiwan, known as a leading semiconductor producer, is currently grappling with a power shortage issue that could potentially impact chipmakers. The energy-intensive process of chip manufacturing is causing strain on the island’s power supply, as the government faces difficulties in meeting the escalating energy demands.
Chen Jong-Shun, an assistant research fellow at Chung-Hua Institution for Economic Research, highlighted the risks posed to the semiconductor industry due to concerns about power shortages and declining energy reliability. Over the past seven years, Taiwan has experienced three major power outages and numerous minor disruptions, with Northern Taiwan reporting multiple power shortages over a span of three days in April.
With more than 97% of Taiwan’s energy being imported, predominantly from coal and gas sources, the island remains susceptible to energy supply disruptions. Joseph Webster, a senior fellow at the Atlantic Council’s Global Energy Center, pointed out that the existing power grid alongside Taiwan’s underpriced electricity bills have contributed to the energy and electricity crunch the country is facing.
Although Taiwan recently raised electricity rates for large industrial users by 15%, residential rates have remained unchanged, leading to escalating demand and supply gaps. Meanwhile, Taiwan Power Company (Taipower) has incurred significant losses, with concerns growing about potential power disruptions affecting both the semiconductor industry and the overall Taiwanese economy.
The electricity shortage could lead to increased semiconductor production costs, which would likely be passed on to consumers. Major chip manufacturer Taiwan Semiconductor Manufacturing Company has indicated that it will pass on cost increases to customers to safeguard profit margins.
Webster highlighted that any interference in Taiwan’s chip production could slow down the industry and elevate global semiconductor prices, potentially impacting the entire global market.
As the semiconductor industry’s demand for electricity is projected to surge in the coming years, there are mounting uncertainties surrounding Taiwan’s capacity to sustain the required energy supplies.
Chen noted that the government’s efforts to align electricity provision with the needs of major companies face challenges due to land restrictions, policy constraints, and insufficient measures to address power shortages, raising concerns about the reliability of future power supply commitments to prominent tech firms.
