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Taiwan to start water rationing in April amid global chip crunch

Worst drought in 56 years hits island's tech supply chain

Taiwanese authorities are implementing strict water restrictions to deal with the island's most severe drought in over 50 years.    © Reuters

TAIPEI -- Taiwanese authorities on Wednesday decided to suspend water supplies for two days a week in some cities, including at some science parks -- the heart of the island's tech supply chain -- from early April as the worst drought in 56 years grows even more severe.

The water shortages affecting Taiwan -- one of the most important links in the world's tech supply chains -- add pressure to an industry already struggling with a global severe semiconductor shortage.

The Ministry of Economic Affairs said it will have to further reduce water consumption in the central Taiwanese cities of Taichung, Miaoli and Changhua by 13% starting April, and to increase the rate of reduction to 15% from April 6, compared to usual usage levels.

In some areas, the government has decided that tap water supplies will have to be cut off for two days a week in order to meet the water reduction goal of 15%. The areas affected by this suspension will have to rely on other sources, such as water trucks, local water storage facilities and groundwater.

"The scope of the water-saving plan does include the science parks in Taichung and Miaoli. We would advise those companies that are within the scope that could face a two-day water-outrage to reserve water or mobilize water trucks in advance," Wang Yi-feng, deputy director-general of the island's Water Resources Agency, told Nikkei Asia.

Jhunan Science Park and Guangyuan Science Park in Miaoli County, which is part of Hsinchu Science Park, the most important link in the island's tech supply chain, are within the scope of the tap water restrictions, according to the ministry's press release.

The planned water rationing measures, the affected areas will be divided into two zones. Zone A will face tap water supply suspensions on each Tuesday and Wednesday, while zone B's water supply will be halted every Thursday and Friday.

Two leading Taiwanese display makers AU Optronics and Innolux said they have already prepared for stricter rationing. Innolux said it has already reached the goal of cutting water consumption by more than 15% and that it recycles 95% of the water it uses. The display maker, an affiliate of iPhone maker Foxconn, said it also signed contracts with local water truck operators and has already started drills to practice.

"Like [Innolux], we also have signed contracts with water truck companies, but we see that as the last resort," said Paul Peng, chairman of AUO, a Tesla and Apple supplier. "We are prepared. We have a water storage facility underneath each of our plants in Taiwan. Some of the plants have stored up to 10 days of water supply [for our use]."

Other major chipmakers such as Taiwan Semiconductor Manufacturing Co. and Winbond have chip production plants in Taichung, while several chip and display makers including Phison Electronics, GlobalWafers and Innolux have production facilities in Miaoli.

The government's decision comes amid an ongoing global shortage of chips and components that shows no signs of abating. Key automobile chip makers Renesas, NXP and Infineon have also faced either fires, earthquakes or heavy snows that have affected their production lines.

Chip and display production requires massive amounts of highly pure water, and Taiwan is facing mounting pressure to deal with the issue, as the democratically-ruled island accounts for some 70% of global semiconductor manufacturing. Taiwan has forecast its economic growth to reach 4.64% this year, but the current water shortage poses a major uncertainty to that outlook.

Nikkei reported earlier that Taiwan's drought risks hitting its major chipmakers and that most of them have initiated contingency plans in case the water supply becomes even more critical.

The last time Taiwan imposed this type of water rationing measure was in spring 2015, but this time the situation is more intense, economic officials said. The total rainfall between October and February was only 752 millimeters, much lower than the 1,059 millimeters rainfall during the same period in 2014 and 2015, the ministry's data showed. The previous measures were only completely lifted in early June in 2015, meaning some areas were affected for up to 61 days.

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