Water Scarcity, Semiconductors, and National Defense
Buried within President Biden’s (Congressionally) controversial infrastructure bill is a $52-billion subsidy for U.S. manufacture of semiconductors. These semiconductors are vital for the manufacture, maintenance, and use of all sorts of technologies critical to U.S. National Security, ranging from personal automotives, medical equipment, precision-guided munitions, and space platforms, semiconductors are ubiquitous to modern life.
Nearly 32% of the world’s semiconductors are produced by the Taiwan Semiconductor Manufacturing Company (TSMC), who consumes approximately 150,000 tons of water per day in order to meet this level of production. However, due to a historic drought the Taiwanese government has been ordered to reduce its water consumption by nearly 15%, forcing it to ship water in from other areas of the world at great expense. TSMC and Intel are both considering opening foundries in Arizona as part of Biden’s $52-billion subsidy, but Arizona’s water conditions are in worse shape than Taiwan’s.
Already taxed by almond and alfalfa farming, as well as a growing population, the Colorado River and Lake Mead are nearing critical levels. The Hoover Dam, responsible for providing power to southern Nevada, would no longer be able to generate electricity were the lake to fall to below 950 feet in depth, an outcome that has a roughly 25% chance of occurring in the next decade. From its current levels, about 1,075 feet, the Colorado River System requires four years of above average precipitation to recover; adding semiconductor manufacture to the equation is unlikely to improve the water scarcity issues in the region as global climate change trends show no sign of slowing.
Water politics aren’t limited to the United States; nations neighboring China have been dealing with their own water scarcity issues. The Tibetan Plateau in Southwest China feeds numerous river systems upon which an estimated two billion people rely for manufacturing, sustenance, and agriculture; however, the People’s Republic of China has built 87,000 dams along these waterways as part of its South-to-North Water Diversion project. As part of this project, the PRC aims to utilize canals, reservoirs, and tunnels will divert water from the water-rich southern Tibetan region to the more populous northern regions of China. In doing so, they severely limit the amount of water available to nations downstream, such as its regional adversary: India.
China has built three dams along the Brahmaputra River, and withheld hydrological data from India resulting in the inability to manage monsoon flooding in 2017. Similarly, while ultimately diffused before open conflict, border disputes along the water-rich Kashmir Region, as recently as 2020, have resulted in minor injuries along both sides and have been increasing in frequency and severity in recent years. Given that Chinese water management efforts are not occurring in a vacuum, these disputes are likely to continue this trend for the foreseeable future.
In a national address in 2017, the Chinese Communist’s Party, President Xi stated that “No country can retreat to their own island, we live in a shared world and face a shared destiny,” and outlined a path forward (to 2050) where China is a world-leading economy, society, and climate reversal power. Recognizing the importance of international trade, President Xi also highlighted his country’s reliance on globalization, referencing the recent “One Belt, One Road” initiative that had raised tensions with the neighboring India, and promised to increase the access foreign companies would have in reaching Chinese markets. This initiative, has been a major factor in setting up predatory conditions favorable to China, including:
- In 2009, China stabilized Argentina’s currency, to negotiate a 50-year, rent-free lease of 500 acres for a satellite tracking facility.
- In 2011, China forgave Tajikistan’s debt for over 1,000 square kilometers
- In 2017, following the commercial failure of the Hambantota Port, Sri Lanka signed a 99-year lease for the operation of the port to China
- China currently has claims to nearly 90 percent of Ecuador’s oil reserves through commodities-backed loans.
These efforts, while a little heavier handed, mirror a lot of what the United States did in its Monroe Doctrine and Marshall Plan following World War II. Within these complementary plans, the United States invested significant resources in rebuilding Europe in order to sway the countries to favor the States over the Soviet Union. This time, the United States is not competing against its competitor: There were no U.S. offers to help pay of Tajikistan’s debt, nor secure Ecuador’s oil reserves. Similarly, there is no assistance coming from the United States to India and its water-based conflict in the Kashmir region.
These aren’t idle conversations to be had at some point in the future; semiconductor production is absolutely vital to our way of life. Preparations for an Chinese invasion and occupation of Taiwan are underway, though not imminent. There is some debate among those familiar with the topic if the threat is credible (e.g., China intends to occupy Taiwan through military force), legitimate (e.g., China has the capability to occupy Taiwan through military force, but will not), or merely a political pressure point (e.g., China threatens it, for the sole purpose of eroding U.S. and Taiwanese resources to defend Taiwan), but the distinction is ultimately irrelevant.
Although there is no explicit timeline, Xi wants unification with Taiwan to be part of his personal legacy.
Regardless of the credibility or legitimacy of the threat of a full scale invasion, the U.S. is far too reliant on the semiconductors produced by TSMC to dismiss it entirely. Factor in China’s willingness to weaponize fresh water against its neighbors, as well as the increasing number of aircraft violating Taiwanese airspace, sea vessels literally stealing the earth from under Taiwanese waters, and political and economic pressure being levied against anyone seen as Pro-Taiwan and the stability of TSMC-produced semiconductors being exported to the U.S. and her allies is not a foregone conclusion.
While there are many other considerations when talking about the defense of Taiwan, such as containing the People’s Liberation Army’s Navy as well as our mutual defense treaties, semiconductor manufacture is the facet that impacts the American way of life most significantly and quickly. In fact, we’ve already seen this sort of impact after a landslide in Taiwan caused a 20–30% markup in hard disk drive (HDD) costs in 2011. In today’s economy, especially with mining operations for crypto-currency causing 100–500% markups on end-products like video cards, water shortages could push prices even further as the semiconductors upon which these end-products are become scarce as well.
We’ve already seen some of these impacts hit the U.S. automotive industry as a result of the 2019–2021 SARS-CoV-2 (COVID-19) pandemic, as just in time production of semiconductors resulted in a significant lag in automotive part production after the near complete global shutdown in 2020. Ford, for its part, expects $2.5-billion in loss revenue in 2021 as a direct result of this shortage. Other manufacturers, like Volvo, who build 18-wheeler trucks upon which the U.S. food chain relies, are also feeling the post-COVID crunch, as are agricultural producers like John Deere. With the ongoing drought TSMC is facing in 2021, it’s unlikely it will be able to ramp up production enough to help the automotive industry catch up after COVID-19; other customers, such as those manufacturing video card and precision-guided munitions are not likely to fare much better.
Unfortunately, the obvious solution of bringing this manufacturing capability to the American West is fraught with the problems identified at the beginning of this article. While we talk about investing in $52-billion into semiconductor manufacture, unless we get our water management under control, wooing the TSMC to Arizona (or investing in IBM to establish its own foundry) and diversify global semiconductor production from both geological and geopolitical threats is not a solution that will return much.
