The global semiconductor industry could face disruptions due to Taiwan's energy crisis.

• In the past seven years, Taiwan has experienced three significant power outages, along with numerous smaller disruptions in the past year.
• The Global Energy Center of the Atlantic Council stated that Taiwan faces both an energy crisis and a more severe electricity crisis.
• Experts said that Taiwan's reliance on imports for over 97% of its energy needs, primarily from coal and gas, makes the island vulnerable to energy supply disruptions.

The global semiconductor industry leader, Taiwan, is currently facing an energy crisis, which may negatively impact chip manufacturers.

The government is facing challenges in meeting the island's energy demands due to the high energy and electricity requirements for manufacturing chips.

The semiconductor industry may face operational risks due to worries about power shortages and declining power quality and reliability, according to Chen Jong-Shun, an assistant research fellow at Chung-Hua Institution for Economic Research, who spoke to CNBC.

In the past seven years, Taiwan has had three major outages, and in the past year, the island has experienced a series of smaller disruptions.

In 2022, there were 313 power outage incidents. A significant power outage in 2017 affected more than 7 million households, while another major blackout in 2017 hit almost 5 million households.

According to Joseph Webster, senior fellow at the Atlantic Council's Global Energy Center, Taiwan faces both an energy and an electricity crunch.

Electricity squeeze

Experts informed CNBC that more than 97% of Taiwan's energy requirements are imported, mainly from coal and gas, making the island vulnerable to energy supply interruptions due to its heavy dependence on other countries.

The electricity crunch in Taiwan is mainly caused by low electricity prices, which increases demand and results in supply shortages, according to Webster.

Large industrial users in Taiwan have seen a 15% increase in electricity rates, while residential consumption rates have remained the same.

Electricity bills in Taiwan are currently less expensive than they were 20 years ago, as stated by the Economic Ministry. However, global commodity prices have experienced a significant increase.

In 2023, Taipower reported a pre-tax loss of $6.3 billion, following a larger loss recorded in 2022.

The semiconductor industry and the Taiwanese economy are concerned about potential power disruptions due to Taipower's financial losses, as stated by Michelle Brophy, director of research at AlphaSense.

According to Brophy, as electricity prices increase for semiconductor firms, it is anticipated that the higher expenses will be transferred to consumers.

In order to safeguard its profit margin, the chip giant has announced that it will pass on cost increases to its customers.

Implications for the chip sector

In 2023, over 55% of Taiwan's electricity consumption was from its industrial consumers, mainly semiconductor firms, who need consistent and dependable power supply.

Taiwan's semiconductor firms will suffer if they are forced to ration electricity more frequently in the future due to limited supplies.

Global semiconductor prices will increase if there is any disruption in energy supply, according to Webster.

The global semiconductor industry could be affected by interruptions in Taiwan's electricity supply, which could have a ripple effect on the global market, according to the speaker.

The global foundry revenue is dominated by TSMC, which accounts for approximately 60% of it. TSMC plays a crucial role in the ongoing generative AI boom and has major tech giants like and as its clients.

By 2030, the global semiconductor manufacturing industry is predicted to double its market size in revenue and will require 237 terawatt hours (TWh) of electricity, according to a Greenpeace report.

The semiconductor manufacturing industry in Taiwan is expected to experience a 236% increase in electricity consumption from 2021 to 2030, according to a report.

"The global electricity industry has been taken aback by the speed and magnitude of electricity demand from artificial intelligence's data centers, according to Webster. He also stated that Taiwan's future electricity consumption is uncertain."

According to Chen from Chung-Hua Institution, Taiwan's government formulates its electricity supply strategy with the demands of major corporations in mind.

Still, meeting Taiwan's energy needs is an uphill task.

Chen stated that Taiwan has faced challenges in achieving its power infrastructure objectives due to limited land, overly ambitious and inflexible policies, and an inadequate comprehension and capability to tackle power shortages.

Major tech firms are facing concerns about the reliability of future power supply commitments due to recent developments.

The semiconductor industry's power dynamics are a persistent concern, particularly because of Taiwan's significant impact, according to Brophy.