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Industry Focus: Semiconductor industry trends and the importance of water resource management

Home 9 Blog 9 Industry Focus: Semiconductor industry trends and the importance of water resource management

The semiconductor industry emerged from 2024 having outperformed expectations and is poised for further growth in both the short and long term. But to truly seize on these opportunities, semiconductor manufacturers will need to grapple with some significant challenges. Here, we’ll take a look at some key trends that are shaping the semiconductor industry and why water resource management will continue to be an important factor in chip fabs’ strategic plans.

Key trends in the semiconductor industry

Strong growth fueled by generative AI

In a world that’s increasingly driven by tech, it is really no surprise that the semiconductor industry is seeing strong growth. Market analysts might range in the exact degree of optimism, but forecasts agree on significant growth both in the short and long term. For example, World Semiconductor Trade Statistics (WSTS) forecasted a 19.0% market growth for the semiconductor industry in 2024, with expectations for strong growth to continue through 2025.[1]  Likewise, Fortune Business Insights forecasted a respectable compound annual growth rate (CAGR) of 15.4% through 2032.[2]

For the last few years, cloud datacenters have been the number one driver behind growth in the semiconductor industry. But last year marked a turning point as generative AI has gained momentum. In fact, a KPMG survey of semiconductor industry executives found that respondents identified AI as the biggest revenue driver, followed by cloud data centers.[3] In its most recent market outlook, Deloitte predicted that generative AI will continue to drive demand for chips in the years to come, citing factors such as a rising interest in enterprise edge computing, as well as anticipated adoption of AI as a feature on personal computers. [4]

Supply chain challenges

A few years ago, manufacturing disruptions stemming from the COVID-19 pandemic hit the semiconductor industry particularly hard. Even a couple of years into post-lockdown recovery, semiconductor fabs struggled to keep up with demand as manufacturing of vehicles, household appliances, video game consoles, computers, and other consumer electronics picked back up. Even though the global chip shortage mostly resolved by the end of 2023, the threat of supply chain disruption continues to loom due to escalating geopolitical tensions, changing trade policies, and extreme weather events. To minimize any potential impacts, market analysts are suggesting that semiconductor manufacturers consider supply chain risks as part of their strategic planning. For example, Deloitte analysts point out the need to build resiliency into supply chains,[5] while a Simon-Kucher analysis suggests that semiconductor manufacturers should consider implementing greater flexibility into their pricing strategy[6] to account for risks associated with supply chain challenges.   

Increasing competition

While the semiconductor industry as a whole is seeing strong demand and healthy growth forecasts, individual semiconductor manufacturers are facing an increasingly competitive market. In some ways this is by design, as China, Korea, the EU, the US, and other governments around the world have invested heavily in semiconductor production in recent years. For example, since the CHIPS and Science Act was signed into law in 2022, the US has awarded more than $33 billion in incentives aimed at boosting semiconductor manufacturing in the US.[7] A significant share of semiconductor manufacturers are taking advantage of these types of government programs to grow their operations, with KPMG reporting that over half of the executives it surveyed either plan to apply, have applied, or have already received government funding.[8] On top of changes inspired by these new funding sources is a diversification of semiconductor manufacturing capabilities, with tech giants, platform companies, and automakers increasingly getting in on chip manufacturing, which is disrupting market share, and putting additional pressure on an already tight market for skilled labor.[9]

Water scarcity defines growth prospects

According to a National Institute of Standards and Technology (NIST) estimate, the average semiconductor fab uses somewhere between 2 and 10 million gallons of ultrapure water (UPW) every day.[10] While this sounds like a lot already, overall water use is actually higher still, since facilities typically lose around 20 to 25% of the raw water that they draw in just in the process of producing UPW. All of this adds up to a very thirsty industry.

Given this high demand for water, it’s no wonder that a recent S&P Global report identified water scarcity as a key risk to semiconductor manufacturers’ operations and ability to access credit.[11] Without reliable access to water, chip fabs may encounter costly downtime or fail to meet output targets, which can damage client relationships or company reputation, and jeopardize creditworthiness.[12] Already, these risks are apparent even to major players in the industry, who have at times taken extraordinary measures to keep up production during water shortages. Such was the case in 2021, when Taiwan Semiconductor Manufacturing Co. (TSMC) began trucking in water and drilling wells in response to a prolonged drought.[13]

In a related trend, chip manufacturers are also seeing increased interest in sustainability on the part of their tech industry customers, who are themselves under pressure to investigate water risks at their own facilities and within their own supply chains.[14] In fact, according to KPMG, 20% of semiconductor industry executives said that meeting the sustainability goals of their customers was one of their top three strategic priorities.[15] As customers further down the supply chain prioritize sustainability, semiconductor manufacturers are finding that responsible water use is necessary to stay competitive.  

Another way that water scarcity is affecting growth prospects for chip fabs is through government funding programs. In the US, for example, the CHIPS Act offers tax benefits, loan guarantees, and grant funding for projects aimed at increasing domestic chip production. While this funding can be generous, it is awarded on a competitive basis, with preference given to projects that incorporate water conservation measures. According to NIST, CHIPS projects are encouraged to reduce, recycle, and treat wastewater through various methods, such as by using dry processes instead of wet processes, optimizing the efficiency of UPW production and use, and by capturing rinse water or other wastewater streams for reuse.[16] So while these programs can provide semiconductor manufacturers with excellent growth opportunities by funding new facilities or capital improvements, they are generally accessible only to firms who build water efficiency into their growth strategy.

Water resource management solutions to meet industry challenges

Semiconductor manufacturers are increasingly recognizing water scarcity as a problem to be solved today, not years from now. Many are implementing water resource management strategies aimed at reducing water waste and overall consumption. Prominent examples include TSMC, which has set a goal for 90% water reclamation for its new chip fab in Phoenix, Arizona, as well as Intel, which is currently working towards net positive water use by 2030.[17] These types of initiatives are helping chip fabs to increase their output while still staying within regulatory limits on the amount of raw water they take in, and wastewater they discharge.

Interested facilities will find no shortage of options for water conservation strategies, however, there are a few challenges unique to the semiconductor industry. For one, comprehensive, end-of-pipe wastewater recycling is generally fairly inefficient for fabs, since the nature of chip manufacturing processes can make for a complex and hard-to-treat wastewater stream. For this reason, fabs are generally better served by segregating waste streams for more targeted recycling and reuse. To make matters more complex, some water treatment experts also say that the fast pace of innovation within the semiconductor industry means that wastewater resource recovery facilities (WRRF) must be designed to be flexible enough to adapt along with rapidly evolving production processes.[18]

Most chip fabs have already adopted water resource management to some degree or another, but it is likely that facilities will continue to build upon existing progress to squeeze the most out of every drop of water they take in. As industry challenges mount, it’s clear that water savings initiatives are helping semiconductor fabs to achieve strategic goals by positioning them to scale up production, insulate their operations from risk, add value to their products, and stay competitive.

How can SAMCO help?

SAMCO has over 40 years’ experience designing and manufacturing custom water treatment systems to conserve water resources, so please feel free to reach out to us with your questions. For more information or to get in touch, contact us here to set up a consultation with an engineer or request a quote. We can walk you through the steps for developing the proper solution and realistic cost for optimizing water use in the electronics or semiconductor industries.

Head on over to our blog to learn more about industrial filtration and process separation technology. Some articles that might be of specific interest to you include:

 

 

[1] World Semiconductor Trade Statistics (WSTS), “WSTS semiconductor market forecast fall 2024,” World Semiconductor Trade Statistics Inc., Dec. 3, 2024. Retrieved Mar. 19, 2025.

[2] Fortune Business Insights, “Semiconductor market size, share, growth & forecast [2032],” Mar. 21, 2025. Retrieved Mar. 21, 2025.

[3] C. Gentle, M. Gibson, A. Scally, and S. Dubois, “Global semiconductor industry outlook for 2025,” KPMG LLC., Dec. 11, 2024. Retrieved Mar. 19, 2025.

[4] J. Kusters, D. Bhattacharjee, J. Bish, J. T. Nicholas, D. Stewart, and K. Ramachandran, “2025 global semiconductor industry outlook,” Deloitte Insights, Feb. 4, 2025. Retrieved Mar. 19, 2025.

[5] Ibid.

[6] A. Echter, B. Manjee, R. Mathew, and T. Stutzman, “The new era of semiconductor pricing” Simon-Kucher & Partners, Dec. 6, 2024. Retrieved Mar. 19, 2025.

[7] M. Holland, “As he exits, Biden awards over $33B in CHIPS Act funding,” Tech Target, Jan. 9, 2025. Retrieved Mar. 21, 2025.

[8] C. Gentle, M. Gibson, A. Scally, and S. Dubois, “Global semiconductor industry outlook for 2025,” KPMG LLC., Dec. 11, 2024. Retrieved Mar. 19, 2025.

[9] Ibid.

[10] National Institute of Standards and Technology (NIST), “Water quality and the semiconductor industry,” Jan. 21, 2025. Retrieved Mar. 19, 2025.

[11] H. Li, “Sustainability insights: TSMC and water: A case study of how climate is becoming a credit-risk factor,” S&P Global, Feb. 26, 2024. Retrieved Mar. 19, 2025.

[12] Ibid.

[13] K. Zhang, “How water scarcity threatens Taiwan’s semiconductor industry,” The Diplomat, Sep. 19, 2024. Retrieved Mar. 19, 2025.

[14] K. James, “The water challenge for semiconductor manufacturing: What needs to be done?,” World Economic Forum, Jul. 19, 2024. Retrieved Mar. 19, 2025.

[15] C. Gentle, M. Gibson, A. Scally, and S. Dubois, “Global semiconductor industry outlook for 2025,” KPMG LLC., Dec. 11, 2024. Retrieved Mar. 19, 2025.

[16] NIST, “Water quality and the semiconductor industry,” Jan. 21, 2025. Retrieved Mar. 19, 2025.

[17] C. Tymkiw, “Semiconductors’ fragile relationship with water may be tested,” Area Development Magazine, Q3 2024, Nov. 27, 2024. Retrieved Mar. 19, 2025.

[18] J. Rydzewski, “Managing water infrastructure for semiconductor fabs: Challenges and opportunities in the CHIPS Act era,” Water Technology, Dec. 5, 2024. Retrieved Mar. 19, 2025.

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