How TSMC Must Balance Growth with Sustainability

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TSMC is one of the world's most successful technology companies | Credit: TSMC
The Taiwan Semiconductor Manufacturing Company (TSMC) is set to report record profits for 2024, but geopolitical & environmental challenge lie ahead

The Taiwan Semiconductor Manufacturing Company (TSMC), renowned as the world's premier contract chipmaker, is set to report an impressive 58% surge in its profit for the fourth quarter of 2024, driven predominantly by escalating demands for AI applications around the world.

With a staggering total close to 2.9 trillion New Taiwan Dollars (US$88bn) 2024 marks TSMC's most lucrative year to date.

It's not all roses and pats on the back, though. Despite its record profits, the company is beginning to face a great deal of scrutiny over its environmental footprint. 

In 2025, TSMC will need to consider how it will respond to emerging sustainability concerns and geopolitical complexities that will likely influence its future.​​​​​​​

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As a crucial component supplier to technology behemoths like Apple and Nvidia, TSMC finds itself at a vital junction of supply and demand in the tech industry.

The final quarter alone of 2024 saw the company achieve a net profit of US$11.41bn, a significant increase from US$7.21bn recorded over the same period the previous year.

This significant profit rise can be attributed to the burgeoning AI sector, which leans heavily on the sophisticated chip technology that TSMC offers. Experts like Brett Simpson of Arete Research suggest that "2025 will be another year where TSMC's growth is largely driven by AI customers."

From crafting technologies that power languages ​​models to autonomous vehicles, AI applications require robust semiconductors, plating TSMC at the core of this technological evolution. Yet, this leads to an increased focus on the environmental toll of semiconductor manufacturing, a process known for its substantial energy requirements.

Brett Simpson, Partner and Co-Founder at Arete Research | Credit: Brett Simpson

Investment in new facilities

To tackle the soaring demand, TSMC has committed to a significant investment in new manufacturing sites, including a US$65bn fab in Arizona, USA.

This project not only aims to increase US manufacturing capacities but also poses questions about its sustainability practices.

Yet, the majority of TSMC's operations will continue to be based in Taiwan, primarily to capitalize on cost efficiencies and access to a skilled workforce.

This heavy reliance on Taiwan-based operations, however, underscores potential vulnerabilities amidst ever-present geopolitical tensions and the broader impacts of climate change, raising concerns about the company's long-term resilience.

What is a 'fab'?
  • A fab is a facility where semiconductor products are made. The term 'fab' is short for 'fabrication'.
  • TSMC's fabrication facilities are called 'GIGAFAB' facilities.

Sustainability and geopolitics

The trajectory of TSMC is deeply intertwined with how it manages complex geopolitical dynamics. The upcoming US administration under Donald Trump, may alter trade policies significantly, including imposing broad import tariffs which could impact TSMC's global operations.

While these geopolitical shifts pose challenges, Brett is cautiously optimistic about TSMC's ability to foster a strong relationship with the US.

"TSMC can build a good relationship with the new administration particularly given its new fab cluster in Arizona is the biggest foreign direct investment project in the US at present," he explains.

Donald Trump, President-elect of the US

But as Edward Chen from Fubon Financial's Securities Investment Unit says: “the impact of tariffs to be imposed by the incoming Trump administration on demand remains to be seen.”

Moreover, the environmental cost of expanding semiconductor production, known for its intensive use of water and energy and significant waste generation, remains a critical issue.

The company has made strides in reducing its environmental impact yet continues to face pressure to align more closely with global sustainability objectives.​​​​​​​

Edward Chen, Chairman of Fubon Financial's Securities Investment Unit | Credit: Edward Chen

The responsible use of critical materials is also imperative if the semiconductor manufacturing industry is to ever be regarded as truly sustainable. Semiconductors require the use of several scarce materials, so conserving resources and protecting global supply chains will be an important part of the future.

TSMC's substantial projected capital expenditures signal its commitment to expansion while underscoring the balancing act it must perform between growth and environmental responsibility—a balance that will likely serve as a benchmark for the entire semiconductor industry.

Lora Ho, TSMC's Senior Vice President and ESG Committee Chairperson | Credit: TSMC

“TSMC strives to integrate technology with sustainable development, joining hands with stakeholders to advance towards prosperity and growth,” says Lora Ho, TSMC's Senior Vice President and ESG Committee Chairperson.

This ongoing commitment is essential as the company looks to maintain its position at the forefront of the technological and ecological landscape.


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