Taiwan no longer wants to merely manufacture the chips that power artificial intelligence (AI). It aims to build the software, platforms and services that run on them.
Ten major AI infrastructure projects, a national cloud computing center in Tainan, the sovereign language model Trustworthy AI Dialogue Engine, five targeted industry verticals — from precision medicine to smart agriculture — and the goal of ranking among the world’s top five in computing power by 2040: The roadmap from “Silicon Island” to “Smart Island” is drawn.
The question is whether the western plains, where population, industry and farmland are concentrated, have the water and electricity to make it happen.
Making chips is thirsty work. Taiwan Semiconductor Manufacturing Co’s (TSMC) Taiwanese fabs drink roughly 150,000 tonnes of water every day — and the Southern Taiwan Science Park (南部科學園區) alone accounts for 99,000 tonnes of that. Most of it is fresh water, despite years of talk about recycling.
The company says it will hit 60 percent reclaimed water by 2030, helped by a new reclaimed water plant at the science park set to deliver 36,000 tonnes daily starting this year.
Welcome progress, certainly, but it hardly alters the underlying arithmetic.
Most readers will remember 2021 well enough. Reservoirs feeding Hsinchu Science Park (新竹科學園區) dropped to levels that nobody had experienced before.
Rice farmers in southern Taiwan — for three planting seasons in a row — were told to stay home. About 74,000 hectares of paddy went dry, their water rerouted to keep the fabs running.
Now layer AI data centers on top. One large evaporative-cooled facility can go through as much water in a year as a medium-sized city’s worth of households.
Google learned that the hard way in Changhua County: It quietly shifted its data center cooling to non-potable industrial water and started investing in local water stewardship programs.
You do not spend that kind of money unless you see trouble ahead.
Ninety-seven percent of Taiwan’s energy is imported. Coal still provides about one-third of generation, liquefied natural gas (LNG) roughly one-quarter and renewables — solar, wind, hydro combined — hover at about 6 percent. That is a lot of fossil fuel arriving by ship. LNG has become the backbone of the power supply, which sounds fine until you consider that current reserves cover perhaps 10 days if maritime shipping were seriously disrupted.
In this neighborhood, that is not a hypothetical.
Offshore wind has made real progress — about 3 gigawatts (GW) were installed by the end of 2024, with the 640 megawatt (MW) Yunlin farm reaching commercial operation in the middle of last year — but the 5.7GW target for last year still looks out of reach.
Solar faces a comparable shortfall. These are not technological failures, but problems of permitting, land access and grid connection — administrative bottlenecks rather than physical ones.
Into this tight picture, AI arrives hungry. TSMC alone eats up close to 10 percent of all the electricity Taiwan generates — and some projections put that figure at 24 percent by 2030.
Then there is the Foxconn-Nvidia data center going up in Kaohsiung (100MW), the Nano 4 supercomputer in Tainan, and quantum computing labs that need rock-steady, uninterrupted power.
Taiwan Power Co (Taipower), sitting on an accumulated deficit of NT$350 billion (US$10.93 billion) while keeping some of the world’s cheapest electricity rates, is candid: Expanding the grid is getting harder, not easier.
Every time water gets scarce, it is rice farmers in Yunlin and Chiayi who pay first. Every time the grid groans, someone has to decide: Do households face rolling blackouts, or does industry — 55 percent of the country’s electricity load — throttle back?
Taiwan posted 8.63 percent GDP growth last year — its strongest in 15 years — fueled overwhelmingly by AI-linked exports. Impressive, yes, but semiconductors alone make up 40 percent of what Taiwan sells abroad and the wealth they generate does not trickle down to the farming communities shouldering the environmental bill.
Branding yourself an “AI Island” while expecting agriculture to absorb the costs in silence is a political choice — one that ought to be debated openly, not made by default.
None of this is inevitable. Taiwan has options — but exercising them means making choices the current political equilibrium tends to avoid.
Start with geothermal. Taiwan sits on the Pacific Ring of Fire; deep potential is estimated at 40GW, of which perhaps 10GW could realistically be tapped. North of Taipei, the Tatun (大屯) volcanic zone is the site of a joint venture between Taipower, Taiwan Cogeneration Corp, Baseload Power and GreenFire Energy working on advanced closed-loop systems — the kind that extract heat without touching groundwater, which matters a great deal when water is already scarce.
Google signed the country’s first corporate geothermal power purchase agreement with Baseload Capital last year, a 10MW deal that would by itself double Taiwan’s installed geothermal capacity of barely 7MW. Yet the official roadmap — 200MW by 2030, 6GW by 2050 — stays cautious. One reason: Regulations still require strictly vertical drilling, ruling out the directional techniques used everywhere else in the world to reach resources beneath protected land.
Hydrogen is worth watching too. Taipower has started blending it into generation at its Kaohsiung thermal plant — the target is 20 percent by 2028 — and Taiwan’s first two refueling stations opened in January.
The catch is obvious: Green hydrogen only works if you have abundant cheap renewables to produce it, and getting wind and solar unblocked is less an engineering problem than a paperwork problem — permits, grid hookups and land access.
Europe is grappling with the same tensions and has started writing rules. The EU now requires data centers to disclose water and energy use. Spain flat-out bans new water-hungry facilities in drought zones. The Netherlands insists on zero freshwater for cooling. France’s Loire River basin authority has turned down cooling permits when river levels drop too low.
The underlying logic is hard to argue with: Why should a data center get a free pass that no steel mill or petrochemical plant would ever receive?
Taiwan need not copy any of this wholesale, but some version of binding water-efficiency rules for data centers, and a public ledger showing what each new facility will actually draw from the grid and the aquifer seem like a reasonable floor.
People make sharper choices when the trade-offs are out in the open rather than buried in permit applications that nobody reads.
Taiwan earned its spot at the heart of the global tech supply chain through decades of industrial discipline. Whether it can stack the next layer on top — sovereign AI, quantum research and a real software ecosystem — without cracking the foundations is a different kind of problem. Not an engineering one. A governance one.
Romain Blachier is president of Association France-Formosa, a columnist and a renewable energy professional in France. He lectures on energy geopolitics at HEIP, ILERI, Hybria and the IEP de Lyon.
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