A greener future is not necessarily a low-tech future. On the contrary, policy experts from the International Energy Agency and the World Economic Forum see smart, data-driven energy systems as crucial to achieving net zero greenhouse gas emissions.
But the chips at the heart of all that clean technology — found in everything from wind turbines to electric vehicles and smart grids — have a large environmental footprint.
According to Harvard research published in 2020, chip manufacturing, not energy consumption, accounts for the majority of carbon emissions from electronic devices. Take the water consumption: a chip factory can use tens of thousands of cubic meters per day, with each cubic meter causing more than 10 kilograms of CO2 emissions through transport and purification.
Record growth in chip demand in recent years also means that manufacturers are consuming more energy. Emissions increase with the size of production facilities, meaning the carbon footprint increases as companies scramble to build out capacity.
The problem is most pronounced in Asia Pacific, which dominates the global semiconductor industry, with regional revenues of $330 billion by 2022, more than half of the global total. South Korea and Taiwan are home to the most advanced chipmakers, and while both countries aim to reach net zero emissions by 2050, their semiconductor giants currently have similar carbon footprints.
For example, in 2020, Taiwanese TSMC’s emissions – from its own activities (so-called Scope 1) and from the energy it bought (Scope 2) – were about 10 million tons, not far from the level for Taipei City. South Korean Samsung will emit 15.6 million tons in 2021.
Now, however, chipmakers are trying to reduce that footprint, aided in some cases by sister companies with green energy expertise.
Increasing the use of renewable energy may seem like an obvious way for these companies to move closer to net zero: for example, by 2021, renewable energy will account for only 9 percent of electricity consumed at TSMC’s generating facilities.
But it remains a tough task in Asia. Almost all of Taiwan’s energy, and about two-thirds of South Korea’s, comes from fossil fuels. And none of the major chipmaker’s climate commitments are consistent with the Paris Agreement’s goal of limiting global warming to 1.5°C above pre-industrial levels. according to a report by action group Greenpeace.
Yet companies such as Samsung, TSMC and South Korean SK Hynix have announced aggressive measures to get all their energy from renewable sources by 2050. These efforts are likely to further boost two growth technologies: green hydrogen and energy storage systems.
Hydrogen is already a crucial input for chip factories. Access to cost-effective “green” hydrogen, produced without CO₂ generation, has long been a major goal for manufacturers. The shift has started in Europe, with gas company Linde supplying chipmaker Infineon in Austria.
This potential for hydrogen as a fuel has sparked further interest. “Hydrogen will undoubtedly play an important role as a fuel in many regions of the world,” said Juergen Guldner, general project manager for hydrogen technology at automaker BMW. “Hydrogen is one of the most efficient ways to store and transport renewable energy, making it a key player in future energy supply.”
The problem is that most hydrogen is currently produced from fossil fuels, with significant CO₂ emissions. That will have to change if it is to become a mainstream fuel, says Guldner. “The success of hydrogen will depend on competitive production of sufficient quantities of hydrogen from green electricity,” he emphasizes.
Another challenge is creating the infrastructure that can transport hydrogen as a fuel to end users. Samsung’s engineering arm, Samsung C&T, has formed alliances with local shipping and construction companies to build a full value chain for the hydrogen industry, from overseas green hydrogen production to domestic delivery. It also produces and distributes clean hydrogen derived from ammonia, which is easier to transport over long distances. Another part of Samsung specializes in green propulsion systems for ships, including hydrogen tankers.
But building infrastructure is a slow and costly process. A more direct solution to the shortage of green energy is to increase the use of energy storage systems. These can compensate for the interruption of wind and solar power, maximizing efficiency by storing electricity during off-peak hours.
The sister companies of the South Korean chipmakers have a strong position here. For example, Samsung SDI is one of the world’s largest makers of energy storage devices, accounting for about a tenth of the global market, while SK Hynix affiliates account for another 6 percent.
The market for energy storage systems is growing rapidly as governments revise their emissions targets — research firm Allied Market Research expects this to happen soon double in size to more than $430 billion by 2030. Unlike batteries for electric vehicles, these storage systems have few size and weight limitations, so more and more battery cells are being loaded into them and it is proving to be a lucrative business. Samsung SDI reported this in April to post first-quarter resultswith profits of more than $4 billion.
Going all out for renewables is now a priority for Asia’s chip makers as they look to match new capacity with forecasts of burgeoning demand – driven particularly by the recent spectacular rise of artificial intelligence – while also responding to the growing pressure to curb emissions.
The green energy solutions that their subsidiaries can offer are a rare example of how companies’ financial interests easily align with those of their regulators.