The Global Semiconductor Industry Risks Being Hampered by Looming Copper Shortage, PwC Report Says

According to a recently published report by PwC, one third of semiconductor production around the globe risks being compromised by copper supply shortages connected to climate change. As water shortages increase, many countries that produce copper, including Chile, will have difficulties producing the critical mineral that manufacturers depend on.

Recently, there was a chip shortage resulting from supply chain disruptions triggered by factory closures when the Covid-19 pandemic nearly brought the global economy to a standstill. During that supply crunch, the auto industry and other sectors that depended on chips were severely impacted.

Glen Burm, the project lead at PwC, reveals that economic growth in the United States contracted by 1% and Germany registered a 2.4% drop in GDP growth. This is according to data obtained by the report authors from the Commerce Department in the U.S.

In a similar way, the report indicates that copper-mining countries like China, Brazil, the DRC, Mexico, Mongolia, Zambia, Peru, Australia and the U.S. will be affected by climate-change triggered water shortages in their copper-mining activities. This challenge will impact all regions around the globe that manufacture semiconductor chips, the report says.

Copper is currently the go-to option in the manufacture of the wires inside each chip. While research is currently ongoing to find new options that can be used in chip production, no viable option so far beats the performance and price efficiency of copper wires.

PwC says the risk to copper supply stands at 50% for every country mining this mineral since water is key to the extraction process. By 2050, half of global copper supply could be impacted regardless of the pace at which efforts to curb carbon emissions are implemented, the report warns.

Some countries, such as Peru and Chile, are taking steps to conserve their water supplies through boosting the efficiency of mining operations. These countries have also established desalination plants. While these measures are exemplary, the report notes that not many countries can take similar steps since they lack access to large quantities of sea water.

The report paints a dire projection for copper production in Chile. It says that currently, a quarter of production capacity in the country is at risk of disruption due to water shortages and this fraction could swell to 75% in 10 years. By 2050, the problem could affect 90-100% of copper extraction in Chile.

This report is likely to be of significant interest to major players like Taiwan Semiconductor Manufacturing Company Ltd. (NYSE: TSM) in the semiconductor industry since the risk discussed affects a key raw material that they require in their manufacturing processes.

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