It looks like this year will be challenging for Taiwan’s manufacturing industry. A staggering global economy is poised to curtail demand for goods made by local companies, while rising water scarcity poses a threat to manufacturing output.
As the full effect from China’s faltering GDP growth and Greece’s deficit problem loom, persistent water supply restrictions are becoming a growing threat to local manufacturers’ factory operations.
As of this month, rainfall in Taiwan has plunged between 50 percent and 70 percent since October last year, driving down water levels at some reservoirs, such as the Shihmen Reservoir, to a decade low. A bigger concern is that next month’s annual rainy season, the so-called plum rain, could arrive late, with less rainfall than average to support the nation’s needs this year.
Companies in the semiconductor, LCD panel and printed circuit board sectors are especially nervous about the drastic decline in rainfall and subsequent potentially stringent water restrictions, as those companies consume massive amounts of water to clean toxic chemicals used during manufacturing. A severe water crisis will be calamitous for production.
Early this month, the government imposed stricter third-phase water rationing in Taoyuan for both industrial users and households. About 1.164 million users are affected by the latest water conservation measures.
Water supply to this region is to be cut to five days per week. In addition, the total water supplied to factories in the region is to be 10 percent lower than normal, according to the Water Resources Agency.
Memorychip makers Nanya Technology Corp and Inotera Memories Inc, which between them operate three factories in Taoyuan, said operations remain intact, as they are trying to store and save as much water as they can to cope with the water shortage. However, it is difficult to say whether water rationing will become even stricter.
Taiwan Semiconductor Manufacturing Co (TSMC), which supplies processors for Apple Inc’s iPhone 6 series, said it recently began using water trucks to transport water from remote areas to ensure a sufficient water supply for its 15 factories in Taiwan. TSMC consumes 90,000 tonnes of water per day.
Printed circuit board manufacturers, including Compeq Manufacturing Co, recently made the rare move of raising prices by 3 percent in the slack season, as jittery customers placed orders three weeks earlier than usual on growing concerns that water scarcity could disrupt printed circuit board supply and delay their product shipments. Printed circuit boards, used in all electronics, are considered a key electronic component.
The Yuanta-Polaris Research Institute, a private think tank, is pessimistic about the situation and early last month warned that a consistent water shortage could wipe away at least 0.8 percentage points from Taiwan’s GDP if local manufacturers curtail 5 percent of their output due to the water crisis. The institute expects Taiwan’s economy to expand 3.3 percent from last year.
As the government has not provided extensive water conservation policies that would ensure an adequate supply for the needs of industry, it seems that Taiwan’s manufacturing sector, and thereby its economy, now have to count on the weather to decide its fate.
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